Peter Gulia

If ERISA’s title I governs the plan: After what you describe as the initial beneficiary designation, did the participant make a new, revised, or reaffirmed beneficiary designation before, during, or after the marriage? What might the plan’s governing documents provide? Does the beneficiary-designation form, whether paper or electronic, the participant signed or used provide anything about the effect of an end of a marriage? Has the administrator recognized a qualified domestic relations order? If so, does the QDRO direct treating the former spouse as a surviving spouse for any portion of the participant’s benefit? If there is no other document, what does the plan’s administrator’s procedure provide? If the plan’s administrator’s procedure does not speak to the situation, what is the administrator’s best reading of the participant’s beneficiary designation?

As Artie M alludes to, often an investment-holding entity is designed and managed so it is not a trade or business, and so is not a part of the same employer as the entity’s investee. But if an investment entity has big-enough ownership interests in two or more operating companies, some of those operating portfolio companies might be one § 414(b)-(c)-(m)-(n)-(o) employer. Yet, those who arrange nonpublic investments often set the interests and relationships in ways designed to avoid common-control groups and affiliated-service groups even regarding investees.

If only the WaybackMachine had preserved Derrin's singing!

IF a goal is causing a portfolio company to be not a part of the same employer as others of the portfolio companies, the investment partnership might—by or before the expiration of the § 410(b)(6)(C) transition period—sell all or some interests in the portfolio company so it is no longer in the same § 414(b)-(c)-(m)-(n)-(o) employer as others.

Consider also whether the distributee’s residence invokes a State’s, county’s, or city’s law (if the jurisdiction can apply its law to the payer) that calls for tax-information reporting and tax withholding, possibly with different thresholds.

If you consider your work practice before the Internal Revenue Service, you might consider the Treasury’s rules for practice before the IRS: § 10.28 Return of client’s records. (a) In general, a practitioner must, at the request of a client, promptly return any and all records of the client that are necessary for the client to comply with his or her Federal tax obligations. The practitioner may retain copies of the records returned to a client. The existence of a dispute over fees generally does not relieve the practitioner of his or her responsibility under this section. Nevertheless, if applicable State law allows or permits the retention of a client’s records by a practitioner in the case of a dispute over fees for services rendered, the practitioner need only return those records that must be attached to the taxpayer’s return. The practitioner, however, must provide the client with reasonable access to review and copy any additional records of the client retained by the practitioner under State law that are necessary for the client to comply with his or her Federal tax obligations. (b) For purposes of this section, Records of the client include all documents or written or electronic materials provided to the practitioner, or obtained by the practitioner in the course of the practitioner’s representation of the client, that preexisted the retention of the practitioner by the client. The term also includes materials that were prepared by the client or a third party (not including an employee or agent of the practitioner) at any time and provided to the practitioner with respect to the subject matter of the representation. The term also includes any return, claim for refund, schedule, affidavit, appraisal or any other document prepared by the practitioner, or his or her employee or agent, that was presented to the client with respect to a prior representation if such document is necessary for the taxpayer to comply with his or her current Federal tax obligations. The term does not include any return, claim for refund, schedule, affidavit, appraisal or any other document prepared by the practitioner or the practitioner’s firm, employees or agents if the practitioner is withholding such document pending the client’s performance of its contractual obligation to pay fees with respect to such document. 31 C.F.R. § 10.28 https://www.ecfr.gov/current/title-31/part-10/section-10.28#p-10.28(a). Further, even when a person is not an attorney-at-law, certified public accountant, enrolled agent, enrolled actuary, or enrolled retirement plan agent (the five kinds of practitioners the IRS recognizes), some look to the Treasury’s rules for practice before the IRS as an aspirational standard. The rule describes returning to a client (or, perhaps, a prospective client) the client-originated records delivered to the practitioner. A practitioner unconstrained by this rule for practice before the IRS might have a greater opportunity to use a retaining lien. Or a practitioner burdened by (or voluntarily following) this IRS-practice rule might also face further restraints under State law. If you are a member of a professional association, consider those conduct rules. If you lack a written engagement, get your lawyer’s advice about whether applicable law nonetheless sets up the prospective client’s obligation to pay a reasonable fee for your work. Likewise, get your lawyer’s advice about whether applicable law sets up your retaining lien in the papers that include your work. If you have professional liability insurance, some insurers help an insured with practical guidance about which documents to keep or deliver. The actuary might consider her professional-conduct rules. For example, Am. Academy of Actuaries, Code of Pro. Conduct, at Precept 10, Annotation 10-5 (2001), available at http://www.actuary.org/files/code_of_conduct.8_1.pdf. This is not advice to anyone.

Even if all other conditions for self-correction are met, the correction must be “within a reasonable period after the failure was identified.” The IRS’s Notice sets up that “a failure that has been corrected by the last day of the 18th month following the date the failure is identified by the plan sponsor will be treated as having been completed within a reasonable period after it is identified.”

RatherBeGolfing, thank you thinking about this and your above-and-beyond of asking Derrin Watson’s thinking. Putting on the § 414(w) distribution claim form, whether software or paper, a distinct voluntary choice to elect a zero deferral might make sense if the service arrangements are such that the retirement plan’s recordkeeper processes participants’ elective-deferral elections, whether default or affirmative, and instructs the employer’s payroll manager (or payroll service provider) for what amount to take from each participant’s pay. (I’m glad I have no client with an automatic-contribution arrangement.)

When was the failure (if any) described above IDENTIFIED by the plan’s sponsor/administrator?

Further, it was the responsible plan fiduciary that decided the plan’s allocation of plan-administration expenses among participants’, beneficiaries’, and alternate payees’ accounts. A fiduciary might allocate all plan-administration expenses only as a uniform percentage of an individual’s account balance. Some say that results in higher-balance participants subsidizing lower-balance participants. And longer-service participants bearing more expense than shorter-service participants. Reasonable minds differ about whether that, or any other allocation, is fair or unfair, equitable or inequitable. rjterpstra19, about the ethics issue you describe, did your personal interest in earning compensation motivate you to provide advice different than the advice you would provide if you had no personal interest? There is a conflict; but is it trifling? Even if one isolates the distribution-processing fee—rather than consider the whole of the service provider’s compensation, isn’t your profit (or loss) on a distribution-processing fee the difference between that fee and your cost to perform the service? If you knew you would have a loss on the distribution-processing fee, would you advise your client that it need not pay the plan-provided contribution? I often bill a client less than the fee the client agreed on. Some work I bill at zero. But I can’t remember doing that because I felt a retirement plan’s provision was inapt or uneconomic.

If a trust its creator intended as a VEBA has provisions of the kinds the Internal Revenue Service looks for when deciding whether a trust is tax-exempt under Internal Revenue Code § 501(c)(9), the trust might have one or more provisions that preclude, or make impractical, a merger of the trust’s remaining assets and liabilities into a retirement plan. See, for example, 26 C.F.R. § 1.501(c)(9)-4(d) https://www.ecfr.gov/current/title-26/part-1/section-1.501(c)(9)-4#p-1.501(c)(9)-4(d). If a failure to file Form 990-something has resulted in a revocation of tax-exempt status, the trustees might seek their lawyer’s advice about the IRS’s ways for an organization to restore its status. (This would not be a procedure regarding a failure to file a Form 5500 report.) Also, a trustee might want one’s lawyer’s advice about whether the trustee breached her responsibility under the applicable law of trusts and other fiduciary relationships. This is not advice to anyone.

Perhaps all in this discussion recognize that the law is ambiguous, and open to many possible interpretations. We all suggest a retirement plan’s sponsor or administrator seek its lawyer’s advice. A plan’s sponsor might want its lawyer’s advice about whether a change is contrary to ERISA § 204 or another provision of ERISA’s title I. A plan’s sponsor might want its lawyer’s advice about whether the plan’s governing documents, including the plan’s ERISA § 402(b)(3) plan-amendment procedure and any discretions granted, permit or preclude the to-be-considered change. Even if a plan’s governing documents do not preclude a change, a plan’s sponsor might want its lawyer’s advice about whether a change is within or beyond ERISA § 204(g), including § 204(g)(3). A plan’s administrator might want its lawyer’s advice about whether a change is valid or invalid. A plan’s administrator might want its lawyer’s advice about whether a fiduciary’s duty of obedience to the plan’s governing documents does not apply to the extent that a document is inconsistent with ERISA’s title I. See ERISA § 404(a)(1)(D). A cautious plan administrator might recognize that it bears a responsibility that does not apply to the plan’s sponsor (in its role as the plan’s sponsor). Before last summer, one might have presumed a Federal court would apply Chevron deference to the Treasury’s interpretive rule. After the Supreme Court’s Loper Bright Enterprises decision, an Article III court may respect and consider an executive agency’s interpretation of a statute, but might not be persuaded by such an interpretation. How to manage uncertainties and risks (and how much or how little advice an advisee seeks) are an advisee’s choices. (I don’t intend anything I’ve written in this discussion to state or suggest a prediction about what a court might find. Rather, my points are that a court might or might not be persuaded by the Treasury’s interpretation when interpreting ERISA’s title I.)

Consider also that a change the Internal Revenue Service treats as not an Internal Revenue Code cutback might nonetheless be an ERISA title I cutback. Although the 1978 Reorganization Plan transfers to the Secretary of the Treasury some authority to interpret some of ERISA’s title I part 2 participation and vesting provisions, a Federal court interpreting a statute—and whether a plan’s provision or change is contrary to the statute’s command—does not defer to an executive agency’s interpretation. Yet, a court might be persuaded by an executive agency’s interpretation.

For distinctions between Form 990, Form 990-EZ, and Form 990-N, there are two dividing lines about an amount: “Form 990 must be filed by an organization exempt from income tax under section 501(a) . . . if it has EITHER (1) gross receipts greater than or equal to $200,000, OR (2) total assets greater than or equal to $500,000 at the end of the [organization’s] tax year[.]” . . . . “If an organization has gross receipts less than $200,000 AND total assets at the end of the tax year less than $500,000, it can choose to file Form 990-EZ, Short Form Return of Organization Exempt From Income Tax, instead of Form 990. See the Instructions for Form 990-EZ for more information.” Instead of Form 990 or Form 990-EZ, a tax-exempt organization may file Form 990-N if it is “[a]n organization whose gross receipts are normally $50,000 or less.” 2024 Instructions for Form 990 Return of Organization Exempt From Income Tax (released January 8, 2025) https://www.irs.gov/pub/irs-pdf/i990.pdf, at pages 2, 3, 4. Other rules apply if the organization has income from an unrelated trade or business. Despite circumstances that permit an organization to choose Form 990-EZ or Form 990-N, one must file Form 990 to change an accounting period. Internal Revenue Code of 1986 (26 U.S.C.) § 6033(n) generally requires electronic filing. For some practical details, see E-file for charities and nonprofits https://www.irs.gov/e-file-providers/e-file-for-charities-and-nonprofits. This is not advice to anyone.

For a SEP-IRA, the receiving account is an Individual Retirement Account or Annuity. Unlike a § 401(a) plan for which a plan’s administrator sometimes might check whether a distribution is enough to meet the plan’s minimum-distribution provision, an IRA trust, custodial account, or annuity contract often provides that the IRA owner decides her distribution, if any. Often, the employer that maintains the SEP is not responsible. Often, an IRA’s custodian or annuity insurer is not responsible. Often, none of an IRA owner’s IRAs provides an involuntary distribution. Rather, an IRA owner decides how to meet the minimum that applies regarding the aggregate of her IRAs. To determine a valuation-year account balance, a § 401(a) plan’s administrator might consider 26 C.F.R. § 1.401(a)(9)-5(b) https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)(9)-5#p-1.401(a)(9)-5(b), which permits some adjustments, to the extent the plan so provides. But for IRAs, a rule provides this: “For purposes of determining the required minimum distribution from an IRA for any calendar year, the account balance of the IRA as of December 31 of the calendar year preceding the calendar year for which distributions are required to be made is substituted for the account balance of the employee under § 1.401(a)(9)-5(b). Except as provided in paragraph (d) of this section, no adjustments are made for contributions or distributions after that date.” 26 C.F.R. § 1.408-8(b)(2) https://www.ecfr.gov/current/title-26/part-1/section-1.408-8#p-1.408-8(b)(2). The referred-to paragraph (d) allows some adjustments regarding rollovers and transfers, but does not particularly mention a corrective distribution of the kind described above. 26 C.F.R. § 1.408-8(d) https://www.ecfr.gov/current/title-26/part-1/section-1.408-8#p-1.408-8(b)(2). This is not advice to anyone.

Q&A L-9 in that Notice calls for Form 1099-R information reporting on a Roth nonelective or matching contribution “for the year in which the contributions are allocated to the individual’s account.” Recognizing that most humans use the calendar year as one’s tax year and that Form 1099-R is on calendar years—no matter which other measurement years and measures for other purposes might be involved, the Notice’s measure for tax-information reporting make sense. Saying a designated Roth nonelective or matching contribution counts in an individual’s gross income for her tax year in which the contribution is allocated to her account enables, regarding most people, using the Form 1099-R reports to information-match income tax returns.

Today’s Federal Register shows no publication of what would have been the notice of proposed rulemaking about adequate consideration for employer securities or the notice of a proposed class prohibited-transaction exemption for selling employer securities to a retirement plan. https://www.federalregister.gov/documents/current Among other consequences, the 1988 proposed rulemaking is not withdrawn. Yet, Federal courts no longer defer to even a final interpretive rule, much less a proposed rule. Absent a legislative rule or regulation made under Congress’s delegation, a court interprets a statute, considering whatever sources of information might persuade the court.

Regarding a chapter 7 liquidation bankruptcy, it matters to distinguish the roles: the debtor, which lacks power except as the bankruptcy court or an Article III court authorizes; the bankruptcy trustee, who takes on the debtor’s role as the retirement plan’s sponsor (if the debtor was the plan’s sponsor); the bankruptcy trustee, who takes on the debtor’s role as an employer that participates under the retirement plan; the bankruptcy trustee, who takes on the debtor’s role as the plan’s administrator if the debtor “or any entity designated by the debtor” was the plan’s administrator [Bankruptcy Code (11 U.S.C.) § 704(a)(11) http://uscode.house.gov/view.xhtml?req=(title:11 section:704 edition:prelim) OR (granuleid:USC-prelim-title11-section704)&f=treesort&edition=prelim&num=0&jumpTo=true]; an eligible designee, if the bankruptcy trustee appointed one (see 29 C.F.R. § 2578.1(j)(4) https://www.ecfr.gov/current/title-29/part-2578#p-2578.1(j)(4)); (If ADP is the plan’s recordkeeper, a bankruptcy trustee’s eligible designee might be State Street Bank and Trust Company, or another trust company the debtor had selected as the plan’s trustee or custodian. A recordkeeper might do much of the work under an arrangement with a trust company the recordkeeper suggests to customers. But last I knew ADP is not a bank, trust company, or insurance company eligible to serve as a qualified termination administrator or eligible designee.) As MoJo explains, if a recordkeeper provides a service meant to be nondiscretionary and constrained by the plan administrator’s policies, procedures, and supervision, a recordkeeper might discontinue such a service until it satisfies itself that the recordkeeper gets its instruction from the person that has the plan-administrator powers and responsibility. Likewise, for a service about something delivered to a plan’s administrator (for example, a draft of a Form 5500 report, or a quarter-yearly report about participants’, beneficiaries’, and alternate payees’ plan accounts), a recordkeeper might wait to deliver that something until the recordkeeper has a court’s order or other satisfactory evidence about which person has assumed the plan-administrator role. A directed trustee should not pay anything to anyone until the trustee receives a proper direction from the plan’s directing fiduciary that has power and responsibility to give the direction. This is not advice to anyone.

While it might be no help now for Tom’s client described above, a charity facing challenges in promptly declaring, determining, and paying contributions might consider, instead of a § 401(k) plan, a § 403(b) plan. Under § 403(b), even a former employee has, for up to about five years after severance, some includible compensation on which a § 415(c) annual-additions limit is measured. Statute: “For purposes of this subsection [I.R.C. § 403(b)], the term ‘includible compensation’ means, in the case of any employee, the amount of compensation which is received from the employer described in paragraph (1)(A), and which is includible in gross income (computed without regard to section 911) for the most recent period (ending not later than the close of the taxable year) which under paragraph (4) may be counted as one year of service, and which precedes the taxable year by no more than five years. . . . .” I.R.C. § 403(b)(3) http://uscode.house.gov/view.xhtml?req=(title:26 section:403 edition:prelim) OR (granuleid:USC-prelim-title26-section403)&f=treesort&edition=prelim&num=0&jumpTo=true “In the case of an annuity contract described in section 403(b), the term ‘participant’s compensation’ means the participant’s includible compensation determined under section 403(b)(3).” I.R.C. § 415(c)(3)(E) http://uscode.house.gov/view.xhtml?req=(title:26 section:415 edition:prelim) OR (granuleid:USC-prelim-title26-section415)&f=treesort&edition=prelim&num=0&jumpTo=true Regulations: “For purposes of applying paragraph (b) of this section [applying I.R.C. § 415 limits to a § 403(b) participant], a former employee is deemed to have monthly includible compensation for the period through the end of the taxable year of the employee in which he or she [the former employee] ceases to be an employee and through the end of each of the next five taxable years. The amount of the monthly includible compensation is equal to one twelfth of the former employee’s includible compensation during the former employee’s most recent year of service. Accordingly, nonelective employer contributions for a former employee must not exceed the limitation of section 415(c)(1) up to the lesser of the dollar amount in section 415(c)(1)(A) or the former employee’s annual includible compensation based on the former employee’s average monthly compensation during his or her most recent year of service.” 26 C.F.R. § 1.403(b)-4(d)(1) https://www.ecfr.gov/current/title-26/part-1/section-1.403(b)-4#p-1.403(b)-4(d)(1) “In the case of an annuity contract described in section 403(b), the term participant’s compensation means the participant’s includible compensation determined under section 403(b)(3). Accordingly, the rules for determining a participant’s compensation pursuant to section 415(c)(3) (other than section 415(c)(3)(E)) and this section do not apply to a section 403(b) annuity contract.” 26 C.F.R. § 1.415(c)-2(g)(1) https://www.ecfr.gov/current/title-26/part-1/section-1.415(c)-2#p-1.415(c)-2(g)(1) Further, § 403(b) has its provision for counting service: “In determining the number of years of service for purposes of this subsection, there shall be included— (A) one year for each full year during which the individual was a full-time employee of the organization purchasing the annuity for him, and (B) a fraction of a year (determined in accordance with regulations prescribed by the Secretary) for each full year during which such individual was a part-time employee of such organization and for each part of a year during which such individual was a full-time or part-time employee of such organization. In no case shall the number of years of service be less than one.” I.R.C. § 403(b)(4) http://uscode.house.gov/view.xhtml?req=(title:26 section:403 edition:prelim) OR (granuleid:USC-prelim-title26-section403)&f=treesort&edition=prelim&num=0&jumpTo=true The implementing regulations state many paragraphs of detailed rules for counting service. 26 C.F.R. § 1.403(b)-4(e) https://www.ecfr.gov/current/title-26/part-1/section-1.403(b)-4#p-1.403(b)-4(e) Example: A charity’s full-time employees work eight hours a weekday. Some part-time employees work two hours a weekday. For them, compensation in the four years before severance counts to form a year’s-worth of compensation that determines a § 415(c) limit on annual additions in limitation years after severance.

If, for example, the plan sponsor Tom describes declares a nonelective or matching contribution based on 2023 compensation but doesn’t pay that contribution into the plan’s trust until February 2025, the contribution counts against the annual-additions limit for whichever limitation year includes February 2025. If that limitation year has also other annual additions—for example, for a nonelective or matching contribution paid or accrued in that year and counted in that year, there could be a bunching effect.

That the employer is a debtor in a chapter 7 liquidation bankruptcy does not by itself undo a fiduciary’s responsibility to administer a retirement plan according to the plan’s governing documents, ERISA’s title I, and other Federal law. But: A bankruptcy trustee or her eligible designee [see 29 C.F.R. § 2578.1(j)], as the plan’s administrator, might consider: whether the bankruptcy trustee amended the plan (for example, to cut optional distributions); whether special circumstances make it prudent to use the maximum period (90 + 90 = 180 days) to process a participant’s claim [see 29 C.F.R. § 2560.503-1(f)(1)]; how a fiduciary’s duty of impartiality relates to the fiduciary’s responsibility. A retirement plan’s directed trustee (if any) should not follow what otherwise might be a proper direction until the trustee has satisfied itself that the direction is given by the person that has authority to direct the trustee. This is not advice to anyone.

Is the employer's bankruptcy a reorganization (chapter 11) bankruptcy, or a liquidation (chapter 7) bankruptcy?

Here’s President Trump’s regulatory-freeze order: https://www.whitehouse.gov/presidential-actions/2025/01/regulatory-freeze-pending-review/. The order directs an executive agency to “[i]mmediately withdraw any rules that have been sent to the OFR [Office of the Federal Register] but not published in the Federal Register[.]” There is an exception if the Director or Acting Director of the Office of Management and Budget “deems [a rule] necessary to address emergency situations or other urgent circumstances, including rules subject to statutory or judicial deadlines that require prompt action.” Congress in SECURE 2022 § 346(c)(4)(B) directs the Secretary of Labor to issue guidance for “acceptable standards and procedures to establish good faith fair market value for shares of a business to be acquired by an employee stock ownership plan[.]” But the statute does not set a due date for that guidance. As I read the order, President Trump directs Acting Secretary of Labor Vincent Micone (or a deputy or assistant) to withdraw Labor’s notice of proposed rulemaking about adequate consideration for employer securities. Such an act today would withdraw the notice before a scheduled January 22 publication.

For some charities, long delays—years—between the work and the employer’s payment to the plan of a nonelective or matching contribution happen (sometimes, because of delays in government payments). Consider carefully which limitation year a particular annual addition is counted in. 26 C.F.R. § 1.415(c)-1(b)(6)(i)(B) https://www.ecfr.gov/current/title-26/part-1/section-1.415(c)-1#p-1.415(c)-1(b)(6)(i)(B) If the charity gets government support or other grants measured even in part based on a measure of cost accounting, consider how the retirement plan allocations affect the cost accounting.

The Congressional Review Act provides a way for Congress to undo an executive agency’s rule. It applies when the agency has made a final rule, published it in the Federal Register, and delivered notice to Congress. That starts a period of 60 legislative days (House) and 60 session days (Senate), with a reset if there is a new Congress. (Your recollection is right; the 115th Congress enacted sixteen disapprovals, Public Laws 115-4, -5, -8, -11, -12, -13, -14, -17, -20, -21, -22, -23, -24, -35, -74, and -172.) But what I describe above happens within the Executive branch. On Monday afternoon, President Trump or his chief of staff might direct whoever then acts for the Labor department to withdraw from the Office of the Federal Register’s publications queue what would have been the notice of proposed rulemaking.