Peter Gulia

It would be a somewhat productive target only if, among other conditions, the IRS could build software to use the data that would find likely examination targets.

Paul I, thank you for your always thoughtful observation. Yet, you might be describing service practices of a quality third-party administrator or focused recordkeeper, but not necessarily the service of some big recordkeepers, perhaps especially some that serve tens of thousands of plans. Some recordkeepers might not look up a plan’s Form 5500 information. That might be so for an automated email assembled using software that might not read the Form 5500 data. Also, isn’t it possible that a big recordkeeper’s system record of a plan’s provisions (including the plan sponsor’s confirmations of provisions not yet stated by “the” plan document) shows that the plan in 2023 and 2024 has no automatic-contribution arrangement, yet a relevant question is whether the plan needs or wants to change to an automatic-contribution arrangement beginning with 2025 (when I.R.C. § 414A first applies as a tax-qualification condition)? I’m guessing (i) there are some § 401(k) arrangements first established after 2022; (ii) some of those do not now provide an automatic-contribution arrangement; and (iii) some, but not all, of those might need, beginning with 2025, an automatic-contribution arrangement to meet the soon-applicable tax-qualification condition of Internal Revenue Code § 414A. Or is my lack of recent experience with services for micro plans causing me to miss something that makes my question not really a question?

Based on your description, one guesses the employer is a § 501(c)(3) charitable organization. And we assume the employer considers using the employer’s, not the plan’s, money. Beyond considering whether the incentive might violate an ERISA command, breach a fiduciary responsibility, or break a tax-qualification condition, the employer might consider whether the incentive would be an appropriate use of the charity’s resources. Or, an expense of about $1,500 might be so trivial than an expense for finding correct answers might be disproportionate to the risks of a wrong answer.

For many SECURE 2019 and SECURE 2022 tax law points, recordkeepers set presumptions about which provisions a customer plan sponsor ought to want or is deemed, absent an opt-out, to have instructed the recordkeeper to assume in providing the recordkeeper’s services. Imagine a recordkeeper chooses to do this about whether a plan provides or omits an Internal Revenue Code § 414A eligible automatic contribution arrangement. Imagine the recordkeeper practically must set the defaults using only the information the recordkeeper’s computer systems know. Imagine the system doesn’t know whether the employer “has been in existence for less than 3 years.” Imagine the system doesn’t know whether the employer “normally employed more than 10 employees.” If the system doesn’t show that the plan’s § 401(k) arrangement was established before December 29, 2022: Am I right in guessing a recordkeeper in these circumstance would set a default that an eligible automatic contribution arrangement is on (until the plan sponsor tells the recordkeeper it’s off)?

BenefitsLink neighbors, what do you think about this: Should an ERISA-governed pension plan’s (whether defined-benefit or individual-account) administrator make and keep a record of every receipt of a court order? Would an evidence-law presumption of regularity help show that an absence of such a record means there is no order that could impair or impede what the plan otherwise provides?

Of the Labor department’s, the Treasury department’s, and the Pension Benefit Guaranty Corporation’s rules and regulations published as final on or after January 20, 2021, which of them—even with an effective date before 2025—do not become applicable before January 20, 2025? (In a convention used by Republican and Democrat Presidents over the past 44 years, a newly inaugurated President’s chief of staff directs executive agency heads to review rules that, even if final and effective, have not yet become applicable.) Has anyone yet written that list? If not, can you help us crowdsource which rulemakings won’t be applicable before January 20, 2025?

Corey B. Zeller, thank you for the excellent reference. About the awkwardness you remark on, it seems the Treasury recognizes there’s no practical way to provide a distribution right to apply for a time that ended.

Just curious, how does that proposed fee compare to an experienced third-party administrator’s time, whether billable or nonbillable, for evaluating whether a client’s governmental plan can be accurately stated within an IRS-preapproved document? Or, might the time it takes to amend a plan without using any IRS-preapproved document be less than the time it takes to work with an IRS-preapproved document?

Here’s a related point, about nondiscrimination: If a right to claim a kind of distribution is a § 411(d)(6)-protected benefit, is it also “a benefit, right, or feature” that must be “made available in a nondiscriminatory manner”? 26 C.F.R. § 1.401(a)(4)-4 https://www.ecfr.gov/current/title-26/section-1.401(a)(4)-4. Imagine one § 414(b)-(c)-(m)-(n)-(o) employer maintains many § 401(a)-(k) plans, each sponsored and administered by one subsidiary or affiliate (and each with a separate recordkeeper, independently chosen by only the particular plan’s named fiduciary). That’s not a far-fetched situation; I have a client in circumstances for which the § 414 employer’s independently managed subsidiaries maintain a few dozen distinct plans. (None could be a qualified separate line of business.) Many employee-benefits lawyers have clients like that. If some of an employer’s plans provide, for example, a domestic-abuse distribution and other plans omit it, must one test whether what’s available does not discriminate in favor of highly-compensated employees? And if one tests this, how does one correct a failure? If, for a year that ended, a kind of distribution was disproportionately available to highly-compensated employees, is there a correction? I ask these questions only as a curiosity. (The client I described solved nondiscrimination exposures of this kind by other means.)

Just curious, do you like or dislike that the Internal Revenue Service announced two years' nonenforcement?

ERISA § 206(d)(3) [29 U.S.C. § 1056(d)(3)] suggests a plan administrator’s responsibility to do something other than or beyond what the plan’s administration otherwise calls for when the administrator has not received a court order does not begin until the administrator has received a court order. ERISA § 206(d)(3)(H)’s command to separately account for what could become payable to an alternate payee if an order is a qualified order does not begin until the plan receives a domestic-relations order. http://uscode.house.gov/view.xhtml?req=(title:29 section:1056 edition:prelim) OR (granuleid:USC-prelim-title29-section1056)&f=treesort&edition=prelim&num=0&jumpTo=true Yet, in considering what to do in a particular situation, an administrator might read, interpret, and consider carefully, including with the administrator’s lawyers’ advice, the plan’s governing documents, the written QDRO procedures, and alternatives for risk-management steps. Also, one might carefully search the plan’s and maybe the employer’s records to confirm not only that no court order was received, but also that no plan fiduciary communicated anything a could-be alternate payee might allege one relied on. When I advise a plan’s administrator about a beneficiary or domestic-relations situation, I sometimes suggest some protections against the possibility that other actors, including courts, often misapply the law. This is not advice to anyone.

The IRS’s 2025 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living, Notice 2024-80, expressly states: “The Roth catch-up wage threshold for 2024, which under section 414(v)(7)(A) is used to determine whether an individual’s catch-up contributions to an applicable employer plan (other than a plan described in section 408(k) or (p)) for 2025 must be designated Roth contributions, remains [for 2025] $145,000.” https://www.irs.gov/pub/irs-drop/n-24-80.pdf The IRS uses the word “remains” for 16 items in the Notice. The IRS uses the lingo and syntax consistently for an amount that, following a rounding rule, doesn’t change for 2025.

Is the plan ERISA-governed?

Without answering your reporting questions: Don’t assume the multiple-employer plan’s administrator would accept responsibility for anything beyond the MEP’s Form 5500 report. Consider carefully what services (if any) your service agreement or engagement letter provides about reporting on the single-employer plan’s accounting period of January 1, 2024 to November dd, 2024. Other BenefitsLink neighbors might tell you what customs of the trade have developed.

I haven’t looked at the measures and arithmetic of the inflation adjustments. Internal Revenue Code of 1986 (26 U.S.C.) § 414(v)(7)(E): “In the case of a year beginning after December 31, 2024, the Secretary shall adjust annually the $145,000 amount in subparagraph (A) for increases in the cost-of-living at the same time and in the same manner as adjustments under [§] 415(d); except that the base period taken into account shall be the calendar quarter beginning July 1, 2023, and any increase under this subparagraph which is not a multiple of $5,000 shall be rounded to the next lower multiple of $5,000.” For this measure for the first year after 2024, might the applicable cost-of-living increase have been less than 3.45%?

For a greater age-based catch-up deferral amount that might be permitted because the participant is treated as age 60, 61, 62, or 63, the Internal Revenue Code refers to “an eligible participant who would attain age 60 but would not attain age 64 before the close of the taxable year[.]” I.R.C. § 414(v)(2)(B)(i) (emphasis added). About Gilmore’s observation: After the first few years § 414(v)(2)(B)(i) applies, its measure that burdens a participant who reaches age 64 by her taxable year’s close might have benefitted that participant who as a 59-year-old for most of a year enjoyed a greater age-based catch-up deferral amount because she then “would attain age 60 . . . before the close of [her] taxable year[.]” (I assume the participant’s taxable year is constant for opening and closing the 60-63 years.) Yet, I could join a “This stinks!” chorus as one who aged out before the provision becomes applicable.

And a good ERISA lawyer wouldn’t do this alone. One would insist on a team of lawyers, with expertise not only in qualified plans, I.R.C. § 4975, and the law of trusts, but also in real property practices, bank lending practices, contracts, agency, partnerships, and a wide range of tax law. And top-notch certified public accountants for accounting and for tax returns.

Consider whether the 130 and 120 measures are truly irreconcilable. If an employee works fewer than 130 hours yet more than 120 hours, Treasury’s rule tells an employer to count no more than 120 of those hours, divide by 120, and count one full-time-equivalent employee. The Treasury’s explanation of the rulemaking suggests some possibility that a choice to use 120 hours might relate in part to information-reporting and other administration needs, with a recognition that some months have as few as 28 days. https://www.govinfo.gov/content/pkg/FR-2014-02-12/pdf/2014-03082.pdf. Consider that on this point the Treasury regulations might not have been made under Congress’s delegation. If so, a Federal court need not defer to the Treasury’s interpretation. Yet, an employer that takes a tax-reporting position or a tax-return position (including deciding not to file an excise tax return) that does not follow the regulations would want a lawyer’s or other IRS-recognized practitioner’s carefully written advice to show good faith and reasonable cause for the positions taken. This is not advice to anyone.

Yes, I wasn't seeking an answer to your question, only one of several bits of information a practitioner might consider in developing one's reasoning toward an interpretation.

Nothing the Treasury department or its Internal Revenue Service has published says taxpayers may rely on an IRS Publication. And a court has held taxpayers may not rely. Adler v. Commissioner of Internal Revenue, 330 F.2d 91, 93, 64-1 U.S. Tax Cas. (CCH) ¶ 9388 (9th Cir. Apr. 2, 1964) (Responding to a taxpayer’s argument that he relied on a statement in the IRS’s Publication 17, the court observed: “Nor can any interpretation by taxpayers of the language used in government pamphlets act as an estoppel against the government, nor change the meaning of taxing statutes[.]”). Further, an IRS Publication is not a source one may use to form a substantial-authority interpretation. See 26 C.F.R. § 1.6662-4(d)(3)(iii) https://www.ecfr.gov/current/title-26/part-1/section-1.6662-4#p-1.6662-4(d)(3)(iii). Although not the statute, a taxpayer or practitioner might consider 26 C.F.R. § 54.4980H-2(c)(2) https://www.ecfr.gov/current/title-26/part-54/section-54.4980H-2#p-54.4980H-2(c)(2). “The number of FTEs for each calendar month in the preceding calendar year is determined by calculating the aggregate number of hours of service for that calendar month for employees who were not full-time employees (but not more than 120 hours of service for any employee) and dividing that number by 120. In determining the number of FTEs for each calendar month, fractions are taken into account; an employer may round the number of FTEs for each calendar month to the nearest one hundredth.” This is not advice to anyone.

The limit on a domestic-abuse distribution is inflation-adjusted.

The political speculation is that providing the bigger catch-up amount beyond 63-year-olds would result in more revenue loss than the appropriations bill then would bear.

2025’s limits on some kinds of early-out distributions bear what to some might seem an incongruity: $1,000 for an emergency personal expense; $5,000 for a birth or adoption; $10,300 when one is a victim of domestic abuse; $22,000 if one had a loss from a federally declared qualified disaster. BenefitsLink neighbors, any observations?

And I don’t read your note as in any way dismissive. For employer/administrators, third-party administrators, and recordkeepers, this point is much less immediate and less important than many other difficulties with SECURE 2019 and SECURE 2022. And as I mentioned twice, even if the current Congress does nothing, there’s another four Congresses and eight years until a more restrictive interpretation would result in an involuntary distribution. Because Congress’s SECURE Acts and others have so many ambiguities is why I think it’s worthwhile for some of us to think about methods for interpreting statutes. Our norm now is making tax law in haste, often with little or no attention in committee hearings, and—in the throes of when a budget-reconciliation or appropriations bill can move (often in December)—with few days and hours to edit a text. When it’s usual for a statute to bear hundreds of ambiguities, having general frameworks for interpreting them can help. Some of us have a little luxury to indulge some thinking about text-interpretation methods. And I recognize many don’t have that time or taste. By opening a question to our BenefitsLink neighbors, Paul I and Luke Bailey graced me with interpretations and reasoning I might not have thought of.

I am not thinking about what level of assistance the government provides and how that relates to whether a place is a disaster area for a disaster-recovery loan or distribution. Rather, I wonder whether a plan’s administrator may rely on a claim’s statement that the claimant is a qualified individual. Or, must the claims-processing look at the participant’s address and screen out for further review a claim of a participant who seems to live nowhere near any of the recent disaster areas? Many plans have so automated claims procedures that a claim not processed wholly electronically is a serious disruption. A process that might require a human to read a claim is a pain-in-the-assets.