Peter Gulia

I estimate the amount remains $105,000 for 2026. (Organized by Internal Revenue Code section; original amount; rounding increment, and rounding down or nearest; and text of the adjustment provision, with highlighting on the base-period year.) I.R.C. § 45E(f)(2)(C)(iii)(II) [Small employer pension plan startup costs]; $100,000; $5,000, rounded down; “the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2007’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.” But in November 2024 the IRS stated: “Pursuant to section 45E(f)(2)(C)(iii), for a taxable year beginning in a calendar year after 2023, this limitation is equal to the initial limitation of $100,000, multiplied by the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2007’ for ‘calendar year 2016’ in section 1(f)(3)(A)(ii). Because the specification of a 2007 base period to be used for computing an adjustment that is first made for 2024 appears to be an error that has been identified as the subject of future legislative correction, the IRS will calculate and apply the limitation in section 45E(f)(2)(C) by substituting ‘calendar year 2022’ for ‘calendar year 2007’ in section 45E(f)(2)(C)(iii). Using that substitution, the limitation for 2024 was [and for 2025 is] $105,000. IRS Notice 2024-80, 2024–47 I.R.B. 1120 (Nov. 18, 2024), https://www.irs.gov/pub/irs-irbs/irb24-47.pdf (emphasis added). from “How to inflation-adjust amounts not designed in Tom Poje’s spreadsheet” https://benefitslink.com/boards/topic/80456-how-to-inflation-adjust-amounts-not-designed-in-tom-poje%E2%80%99s-spreadsheet/#comment-354056.

In sharing observations to help Santo Gold answer the question, it seems the three of us suggest reasonings under which an automatic-contribution arrangement would be neither a protected benefit (for ERISA title I and tax Code vesting provisions) nor a “benefit, right, or feature” (for I.R.C. § 401(a)(4) nondiscrimination). I’m unaware of a Labor or Treasury rule, whether legislative or interpretative, that confirms that an automatic-contribution arrangement is not such a benefit. (That’s not surprising considering that the agencies made relevant rules before automatic-contribution arrangements became much more common after the 2006 Act.) This is not advice to anyone. Consider CuseFan’s practical suggestions.

For years, John Feldt has generously given us inflation updates using Tom Poje’s spreadsheet. But that spreadsheet might not do everything we now use. That’s for at least a few reasons: The spreadsheet likely was designed for to-be-adjusted items then known, not for laws Congress enacted later. Not all adjustments, even those for points a retirement-plans practitioner cares about, fall in with § 415(d)’s regime; many refer to an adjustment regime under Internal Revenue Code § 1 or something else. Even beyond those points, the spreadsheet might have been designed based on expected users’ business interests. Some BenefitsLink neighbors already have asked about adjustments not in the spreadsheet. Let’s crowdsource some recent measures. I’ll start: (Organized by Internal Revenue Code section; original amount; rounding increment, and rounding down or nearest; and text of the adjustment provision, with highlighting on the base-period year.) I.R.C. § 45E(f)(2)(C)(iii)(II) [Small employer pension plan startup costs]; $100,000; $5,000, rounded down; “the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2007’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.” But in November 2024 the IRS stated: “Pursuant to section 45E(f)(2)(C)(iii), for a taxable year beginning in a calendar year after 2023, this limitation is equal to the initial limitation of $100,000, multiplied by the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2007’ for ‘calendar year 2016’ in section 1(f)(3)(A)(ii). Because the specification of a 2007 base period to be used for computing an adjustment that is first made for 2024 appears to be an error that has been identified as the subject of future legislative correction, the IRS will calculate and apply the limitation in section 45E(f)(2)(C) by substituting ‘calendar year 2022’ for ‘calendar year 2007’ in section 45E(f)(2)(C)(iii). Using that substitution, the limitation for 2024 was [and for 2025 is] $105,000. IRS Notice 2024-80, 2024–47 I.R.B. 1120 (Nov. 18, 2024), https://www.irs.gov/pub/irs-irbs/irb24-47.pdf (emphasis added). (Some practitioners, especially those proposing services for a startup plan, want to know this adjustment now because it affects an employer’s tax credit, which might affect whether the employer sees service providers’ fees as affordable.) I guess the amount remains $105,000 for 2026. I.R.C. § 72(t)(2)(K)(vii)(I) [eligible distribution to a domestic abuse victim]; $10,000; $100, rounded nearest; “the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2023’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.” {So, $10,500 or $10,600?} I.R.C. § 219(b)(5)(C)(i)(II) [IRA contribution]; $5,000; $500, rounded down; “the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2007’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.” I.R.C. § 219(b)(5)(C)(iii)(II) [age 50 extension for IRA]; $1,000; $100, rounded down; “the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2022’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.” 401(a)(39)(B)(ii)(II) [qualified long-term care distribution]; $2,500; $100, rounded nearest; “the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2023’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.” I.R.C. § 408(d)(8)(G)(i)(II) [qualified charitable distribution]; $100,000 / $50,000; $1,000, rounded nearest; “the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2022’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.” I.R.C. § 457(e)(11)(B)(ii) [length-of-service award]; $6,000; $500, rounded down; “In the case of taxable years beginning after December 31, 2017, the Secretary shall adjust the $6,000 amount under clause (ii) at the same time and in the same manner as under section 415(d), except that the base period shall be the calendar quarter beginning July 1, 2016, and any increase under this paragraph that is not a multiple of $500 shall be rounded to the next lowest multiple of $500.” Instead of § 415(d)’s July-August-September measures, Internal Revenue Code § 1(f)(4) provides: “For purposes of [I.R.C. § 1(f)](3), the CPI for any calendar year is the average of the Consumer Price Index as of the close of the 12-month period ending on August 31 of such calendar year.” On October 9, the Internal Revenue Service released 2025 amended amounts (following the July 4, 2025 budget-reconciliation Act) and tax-year 2026 inflation adjustments for 63 tax provisions. Rev. Proc. 2025-32 (not yet published in the Internal Revenue Bulletin), available at https://www.irs.gov/pub/irs-drop/rp-25-32.pdf. Among others, 2026’s § 125(i) limit on salary reductions to a health flexible spending arrangement is $3,400, with a $680 maximum carryover. In the Bureau of Labor Statistics website, a search on [“Consumer Price Index” AND August] calls up many earlier years September releases of August-close measures. https://data.bls.gov/search/query/results?q=%22Consumer%20Price%20Index%22%20AND%20August BenefitsLink neighbors, with a little work we can figure any not-yet-released inflation adjustment. Inflation.docx

Does $145,000 inflation-adjust to $150,000? For the tax law that a higher-wage participant’s age-based catch-up deferrals must be Roth contributions, the unadjusted § 414(v)(7)(A) amount was $145,000. For 2024, the first tax year § 414(v)(7) applied (even if not enforced), a participant was § 414(v)(7)-affected if her 2023 wages was more than $145,000. Despite the IRS’s nonenforcement relief, the IRS published the § 414(v)(7)(A) amount for 2025: “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 . . . for 2025 must be designated Roth contributions, remains $145,000. IRS Notice 2024-80, 2024–47 I.R.B. 1120 (Nov. 18, 2024), https://www.irs.gov/pub/irs-irbs/irb24-47.pdf (emphasis added). In that 2024 Notice, the IRS said “remains” sixteen times. Four of those uses were for amounts the IRS identified as “not subject to an annual cost-of-living adjustment[.]” I infer the other twelve uses were about measures for which the CPI-U changes were not wide enough to reach a rounding increment. Because the § 414(v)(7)(A) amount was among those twelve, I presume CPI-U changes from 2023Q3 to 2024Q3 were not enough to reach § 414(v)(7)(E)’s $5,000 rounding increment. Yet, with no adjustment and despite the nonenforcement relief, the IRS explained how to apply § 414(v)(7) for 2025, looking to the preceding year’s wages. To adjust the § 414(v)(7)(A) amount to be used to apply § 414(v)(7) for 2026 deferrals: The base period is July-August-September 2023. The adjustment period is July-August-September 2025. [For the statute and Treasury regulations, see https://benefitslink.com/boards/topic/80061-is-150000-the-limit-on-2025-fica-wages-before-a-participant-must-make-2026-age-based-catch-up-elective-deferrals-as-roth-contributions/.] Consumer Price Index for All Urban Consumers (CPI-U) 2023 July-August-September: 305.691 + 307.026 + 307.789 2025 July-August-September: 323.048 + 323.976 + 324.800 Applying those changes, John Feldt’s math (generously given to us) puts the unrounded amount at $153,077, and the to-be-published amount as $150,000. https://benefitslink.com/boards/topic/80106-2026-cola-projection-of-dollar-limits/ An ambiguity (if any) results not from that math, but from interpreting Congress’s text. The tax statute reads: “[I]n the case of an eligible participant whose wages (as defined in section 3121(a)) for the preceding calendar year from the employer sponsoring the plan exceed $145,000, [I.R.C. § 414(v)](1) shall apply only if any additional elective deferrals are designated Roth contributions (as defined in section 402A(c)(1)) made pursuant to an employee election.” I read § 414(v)(7)(E)’s (the adjustment provision’s) reference to “the $145,000 amount in subparagraph (A)” as referring to § 414(v)(7)(A)’s reference to “wages . . . for the preceding calendar year[.]” So, a participant will be § 414(v)(7)-affected for 2026 if her 2025 wages was more than $150,000. BenefitsLink neighbors, do you read the law the way I read it? Without waiting for an IRS release (which might be shutdown-delayed), many employers, plan administrators, and service providers want now the estimate—even if one explains it’s not yet official—to communicate with might-be affected participants and to help payroll managers prepare to identify 2026’s affected participants.

I’m familiar with Nevin’s views on many topics, including his recent things-that-make-me-mad lists. Especially his observations about illogical or intemperate extrapolations and observations. Rather, I’m thinking about stuff that might lead an EBSA employee to think it’s worthwhile to start an EBSA investigation, or at least an inquiry. And I’m not thinking about queries that might lead to a subtle point, but rather those that can suggest a realistic possibility of a breach. For example: late contributions? Did the plan have any non-cash contributions? Did the plan fail to provide required blackout disclosures? Did the plan have any (nonexempt) reportable transactions? Is the plan covered by fidelity-bond insurance? My time since I last regularly advised a Form 5500 work group likely is longer than yours. But I remember how often a customer furnished for the service provider’s assembly responses that were factually wrong for the question asked. And often perversely so, suggesting a possible violation or breach when none there was. I suggest there’s an opportunity for service providers to do a value-add for customers, especially those that administer small plans. And guarding against unconsidered responses to a Form 5500 query might help service providers too. (I don’t intend anything that would aid those who sell to fear, or exploiting perceived or even actual weaknesses in a retirement plan’s administration.)

Whatever ERISA and the Internal Revenue Code might permit a plan to provide, there might be three layers of documents to read. Do the plan’s governing documents provide for using forfeitures to pay or reimburse plan expenses? (Just yesterday, I reviewed a set of plan documents, made using a big recordkeeper’s IRS-preapproved documents, that read strictly preclude using forfeitures on plan expenses.) Does the service agreement obligate the recordkeeper to process the plan trustee’s reimbursement of a plan expense the employer paid? Does the service agreement set restrictions or conditions on processing amounts from forfeitures? (Recognizing that many plan sponsor-administrators get little or no legal advice, a service provider might narrow its obligations or set conditions to manage risks that the service provider is criticized for “allowing” a plan’s administrator to do something it ought not to have done.) Does the trust agreement or custodial-account agreement provide for the trustee or custodian to reimburse a plan expense the employer paid? If a reimbursement is provided or not precluded, what conditions does the agreement set for showing the trustee or custodian that the reimbursement is proper? This is not advice to anyone.

If a payroll service provider charges its fee for processing participant loan repayments, who pays that fee--the employer or the employee?

Yes, users of Tom Poje’s spreadsheet or another method now have the September Consumer Price Index measure. And here’s a BenefitsLink discussion that anticipated the government shutdown: https://benefitslink.com/boards/topic/80346-how-would-lacking-official-inflation-adjusted-amounts-affect-your-work/.

Another BenefitsLink discussion includes my inquiry about whether an automatic-contribution arrangement is a benefit, a burden, or neutral. https://benefitslink.com/boards/topic/73902-is-auto-enroll-an-actual-feature/ To consider whether either kind of election regime—affirmative or default—might be a protected benefit for a plan’s vesting provisions, one might consider that under either regime a participant retains a right to elect for or against deferrals. This is not advice to anyone.

The Bureau of Labor Statistics slightly varied Labor’s shutdown plan to allow work on the Consumer Price Index measure as needed to set increases in Social Security payments. Today BLS announced September’s CPI measure. https://www.bls.gov/ But the IRS people who apply CPI measures to form the adjustments the Internal Revenue Code calls for won’t be available to work on this until after the government shutdown ends. Now that September’s CPI measure is announced, unofficial estimates might complete the arithmetic. Some of us observed in July some adjustments that would be within rounding bands, even if August’s and September’s inflation would be much higher than expected. Over the past dozen weeks, I’ve advised some clients to prepare for Thanksgiving arriving with the IRS not having released inflation-adjusted amounts.

The forms for an employee-benefit plan’s annual report ask questions designed to check some points about whether the plan’s fiduciaries meet their responsibility. Imagine a recordkeeper, third-party administrator, auditor, or other service provider now is thinking about a value-add for next year’s 5500 services. The idea: List all Form 5500, including Schedules, queries that ask something for which a report’s reader could use the response to detect or suspect a possible breach of a fiduciary’s responsibility. (Not a tax-qualification failure, unless it also involves some other breach of an ERISA fiduciary responsibility.) https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500 Isolating those Form 5500 queries in one list would aid a service provider’s review to spot responses that could lead to government or private enforcement. Let’s crowd-source the list, with each BenefitsLink neighbor noting one query. Don’t repeat a query already noted. Quicker responders might note the obvious queries; later responders are challenged to find more subtle queries. If enough of us add one item, we’ll collect a complete list. I volunteer to assemble the whole list, in a table format—with Form or Schedule, part, and line numbers; the query; and an explanation.

EBSA’s bulletin states only that the Labor department “will not pursue [a] violation[]” under the conditions the FAB describes. That nonenforcement policy does not excuse a fiduciary’s breach. If a retirement plan’s administrator has already found that the participant’s purported identifying number is false—and might suspect that the purported or ostensible name also is false, how would an administrator meet all five conditions (including having conducted a prudent search for the missing or nonresponsive participant)? How would a fiduciary have conducted a prudent search for someone whose identity is unknown? Even if the applicable State’s abandoned-property regime (to be chosen following the participant’s “last known address”) meets all nine conditions for an “eligible state fund”, how would a fiduciary using the experienced “care, skill, prudence, and diligence” ERISA § 404(a) requires form a finding that the abandoned-property regime “is a prudent destination for the participant’s or beneficiary’s retirement benefit payments”? (I’m not saying a fiduciary could not reason through to the finding, only that the reasoning might not be obvious.) I don’t suggest that anyone ask the Labor department for guidance. And I don’t suggest asking anything of Congress or of any executive agency.

Unless the pension plan defines a QDRO more generously than ERISA § 206(d)(3) requires, the plan’s administrator might consider (and get its lawyer’s and actuary’s advice on) the QDRO regime’s general principle that a QDRO does not provide a benefit the plan does not otherwise provide. If the plan’s only death benefit is (or was at the relevant time) a QPSA for a participant’s surviving spouse, what benefit could a court’s order attempt to provide to a participant’s former spouse who was not the participant’s spouse (or deemed surviving spouse) when the participant died? This is not advice to anyone.

After the Immigration Reform and Control Act of 1986, the problem of employments processed with false identifiers and resulting retirement plan accounts has persisted. This difficulty might be something for a SPARK working group to sort out.

ratherbereading, thank you for this vote of confidence. Even if the April 2023 discussion was about similar facts and circumstances, I didn’t suggest a particular conclusion, but rather that the plan’s administrator might want its lawyer’s advice. While I suggest that a person not alter, discard, or conceal records, that does not by itself suggest there is a duty to report a crime or other violation. Consider that, for a situation that involves matters beyond Federal tax law, evidence law might privilege lawyer-client confidential communications, but does not privilege communications with another kind of practitioner. Consider how a retirement plan’s administrator would identify that a potential distributee now is the same person as the one who earned the benefit. Beyond the false identification number, there might have been other false identifiers. This is not advice to anyone.

If the turn date is July 7, 2025 (and the relevant plan-accounting and limitation years have been the calendar year), might the fraction be six-twelfths, or perhaps a little more? Before getting into how to treat the 6 days/31 days [0.193548387] or 7 days/31 days [0.225806451] of July, one might consider how the plan’s administration counts compensation. For example, if the plan’s administrator has, for § 401(a)(17), § 401(k), § 402(g), § 415(c), and other provisions counted compensation by looking to compensation paid, rather than accrued, one might consider the pay periods and pay dates. See, for example, 26 C.F.R. § 1.415(c)-2(e)(1)(i) https://www.ecfr.gov/current/title-26/part-1/section-1.415(c)-2#p-1.415(c)-2(e)(1)(i). For example, if the employer has used a 24 pay cycle with two pay dates in each month—on the 15th and the last day of the month, there might be no July pay to count in the compensation measured for a § 415(c) limit. If so, might six months/12 months be a sensible fit? Or, if there was an early July pay date before the plan’s discontinuance, one might form a reasoned fraction that catches the general sense of § 1.415(j)-1(d)(3). This is not advice to anyone.

Thank you for this excellent reasoning. And I like it even more because it supports advice I gave almost 20 years ago in my first year of private law practice after recordkeeping. For those clients that ask for my advice on plan design, I’ve suggested 15 years. But I’m open to different or further analysis. Can anyone suggest circumstances or factors that would support a longer repayment period—for example, 30 years?

A loan a participant uses to buy her principal residence may set a repayment period longer than five years (within what the plan’s governing documents, often including a written policy or procedure, allow). But if the plan’s sponsor-administrator is listening to your advice, what maximum do you suggest? 50 years? 30 years? 20 years? 15 years? Something else? The longest repayment period the recordkeeper agrees to process? And whichever maximum you suggest, why do you prefer it over other possibilities?

If IRS people obey the IRS's shutdown plan, I don't see how the IRS would publish or even release inflation adjustments any sooner than after the shutdown ends. But if BLS releases Consumer Price Index measures Friday, many practitioners can do the arithmetic (or use someone else's) to set unofficial amounts.

You might consider a strategy in the other direction: Respond promptly, and let delays in the IRS use up some of the remaining statute-of-limitations period. Later, when the IRS requests the taxpayer’s consent to extend the statute-of-limitations period, you’ll have a bargaining chip. You might say your client will consent only after there is a written agreement for the IRS to abandon and close all but a specified set of remaining issues, narrowing any further examination to only those.

For the particular matter I’m now working on, I found my answer: An Ascensus recordkeeper agreement with an add-on for using Ascensus as the default-IRA provider says two IRAs—Roth and traditional. But is that way universal?

Assume a participant severs from employment with a nonforfeitable account less than $7,000 (and more than $1,000) and the plan provides an involuntary distribution. Despite that small size, the account includes both Roth and non-Roth subaccounts. (For example, elective deferrals were Roth and matching contributions were non-Roth.) Assume the participant, after the proper notices, does not specify her preference for the distribution, invoking the plan’s default rollover. Does a plan's administrator with its service provider pay separately the Roth and non-Roth amounts? Or does a plan’s administrator and its service provider pay one sum, and instruct the default IRA provide on the distinct Roth and non-Roth amounts? Does a default IRA provider separately account for the Roth and non-Roth amounts? Does a default IRA provider put this in two IRAs? Or in one IRA with subaccounts?

If the buyer seeks to manage the risk that the rule mentioned might apply and might tax-disqualify one or more plans or § 401(k) arrangements, the buyer might consider: Obtaining a law firm’s written opinion that, on the draft deal documents and plans’ documents and other assumed facts, the outcomes would be as casey72 suggests; and Buying tax insurance against a failure of the desired outcomes. This is not advice to anyone.

The statute’s exception refers to whether “the employer maintaining the plan normally employed more than 10 employees.” I.R.C. (26 U.S.C.) § 414A(c)(4)(B). Here’s the Treasury’s proposed interpretative rule: https://www.govinfo.gov/content/pkg/FR-2025-01-14/pdf/2025-00501.pdf. To count the number of employees the employer “normally employed”, the proposed interpretation cross-refers to 26 C.F.R. § 54.4980B–2/Q&A–5. I see nothing that excuses from the count employees covered by a collective-bargaining agreement. But a plan’s sponsor or administrator might want its lawyers’ advice about whether one should interpret an implied delay of § 414A’s tax-qualification condition if implementing an automatic-contribution arrangement now would breach a currently effective collective-bargaining agreement or otherwise violate labor-relations law. Until the applicability date of an effective final rule, one might rely on a reasonable interpretation of the statute. Even if a consultant otherwise is comfortable providing advice about tax law, one might be reluctant to advise about tax law that’s affected by labor-relations law. This is not advice to anyone.

Consider that a lawyer’s inquiry to EBSA now (during a government shutdown) likely could be ineffective because an EBSA employee who could provide useful information might be precluded from working for EBSA. Instead, a lawyer and her assistants might use the time before the government shutdown ends to gather facts, research relevant law, and refine arguments before one presents an inquiry. This is not advice to anyone.