Peter Gulia

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.

Consider also circumstances in which an administrator may or must not rely on a participant’s self-certification that she is a qualified individual.

Paul I mentions an important reminder: It’s now no more than 23 business days before December 2. (It might be fewer if an employer or its service provider treats Election Day or Veterans Day as a holiday. Veterans Day is a holiday for Federal and many State and local government employees, and for businesses that follow Federal, rather than New York Stock Exchange, holidays.) Have recordkeepers yet programmed the computers for which people (maybe including LTPT employees) to send an automatic-contribution arrangement’s opt-out notice to? Or, does a recordkeeper leave it to its customer, an employer/administrator, to decide which people to send a notice to? And if a recordkeeper leaves it to the plan’s administrator, does that practically mean its third-party administrator?

While recognizing your aim of not putting too much information on a public website, it might help if you can, without risking privacy, mention: Is the retirement plan buying? Is the retirement plan selling? Is the company buying? Is the company selling? Is the buyer not a party-in-interest regarding the retirement plan? Is the seller not a party-in-interest regarding the retirement plan? Is the real property employer real property? Is the search for a lawyer to advise the buyer? Or a lawyer to advise the seller? Or a lawyer to advise the plan’s fiduciary, even if the plan is neither the buyer nor the seller? Which expertise does the advisee seek? Planning for ERISA-prudent decision-making? Or experience in real-property transactions? Or a firm with lawyers in both practices?

For what the Labor department describes as a safe-harbor rule regarding “a plan with fewer than 100 participants at the beginning of the plan year”, it’s “the 7th business day following [a measured-from date].” 29 C.F.R. § 2510.3-102(a)(2)(i) https://www.ecfr.gov/current/title-29/part-2510/section-2510.3-102#p-2510.3-102(a)(2)(i). For those who use an invented presumption of one, two, or three days, one imagines it might make sense to count it in workdays, business days, or banking days. This is not advice to anyone.

Some plans’ administrators might distinguish between employees who become LTPT-eligible on or after January 1, 2025 (or the later effective date of the new cash-or-deferred arrangement) and those who became LTPT-eligible before 2025 (or the later effective date of the new cash-or-deferred arrangement). Consider this BenefitsLink discussion: https://benefitslink.com/boards/topic/71407-auto-enrollment-for-new-plans-auto-enroll-everyone-or-new-hires/. American Retirement Association’s February 20, 2024 letter to the Internal Revenue Service “recommends” the IRS “Confirm that the mandatory [eligible automatic-contribution arrangement] applies only for employees who are enrolled in the plan on or after the plan becomes subject to the [I.R.C. § 414A] mandate.” And: “ARA recommends the Service provide that the automatic enrollment need only apply to participants who enter the plan after the effective date of the plan’s EACA provision in order to provide small employers with the maximum flexibility to comply with the mandate.” https://araadvocacy.org/wp-content/uploads/2024/02/ARA-Comment-re-Notice-2024-02-SECURE-2.0-Grab-Bag.pdf. I have not formed any interpretation of Internal Revenue Code § 414A. (I have no client with a cash-or-deferred arrangement not established before December 29, 2022.) Perhaps some customary practices might emerge from whether recordkeepers’ and third-party administrators’ software tools can identify for an automatic-contribution arrangement those who became eligible before the cash-or-deferred arrangement began or begins.

Has the bank or trust company told the employer the reason for not opening an account? Might the reason relate to a mismatch about a Social Security Number or Individual Taxpayer Identification Number?

In an Act of Congress revising Federal tax law, especially legislation enacted under a budget-reconciliation or appropriations procedure, an amount or other measure might relate to what the legislators sought in the Joint Committee on Taxation’s and Congressional Budget Office’s scoring of the legislation’s revenue, expenditure, and other budget effects. For example, JCT’s December 22, 2022 estimates on the Senate-passed Consolidated Appropriations Act show the disaster provisions’ revenue loss as $1.981 billion for fiscal years 2023-2032.

Consider also that a lawyer who has a right to practice law in Texas or California might lack a right to practice law in the Republic of the Philippines.

Two further thoughts: Don’t assume a multiple-employer plan allows a spin-off; some might not. When an employer or service recipient considers a pooled employer plan, association retirement plan, professional employer organization’s MEP, or other multiple-employer plan, recognize that one might become discontent with the arrangements; and evaluate the exit rights before signing the participation agreement.

I have not researched the wage-reporting and tax-reporting questions. (No client has done a transfer of the kind described above.) Some sources an employer/obligor or its lawyer or other tax practitioner might consider include: Internal Revenue Code of 1986 § 457 http://uscode.house.gov/view.xhtml?req=(title:26%20section:457%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section457)&f=treesort&edition=prelim&num=0&jumpTo=true 26 C.F.R. § 1.457-10(c) https://www.ecfr.gov/current/title-26/part-1/section-1.457-10#p-1.457-10(c) I.R.C. (26 U.S.C.) § 1041 http://uscode.house.gov/view.xhtml?req=(title:26%20section:1041%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section1041)&f=treesort&edition=prelim&num=0&jumpTo=true 26 C.F.R. § 1.1041-1T https://www.ecfr.gov/current/title-26/section-1.1041-1T; and because tax law sometimes requires reporting even when something is not yet income: Form W-2 Instructions https://www.irs.gov/pub/irs-pdf/iw2w3.pdf Form 1099-MISC Instructions https://www.irs.gov/instructions/i1099mec. A lawyer, certified public accountant, enrolled agent, or other practitioner who follows the Circular 230 rules for practice before the Internal Revenue Service could not provide advice until she has read (at least) the plan’s documents and the divorce documents, even if there is no distinct order beyond the divorce and the divorcing parties’ settlement agreement. This is not advice to anyone.

The notice was published in this week’s Internal Revenue Bulletin. So: Additional Guidance with Respect to Long-Term, Part-Time Employees, Including Guidance Regarding Application of Section 403(b)(12) to Long-Term, Part-Time Employees under Section 403(b) Plans, Notice 2024-73, 2024-43 I.R.B. 1007 (Oct. 21, 2024), https://www.irs.gov/pub/irs-irbs/irb24-43.pdf.

For two of several interpretations of a before-ERISA funding condition, consider: IRS Publication 778 (Feb. 1972), part 2(b); IRS General Counsel Memo. 36813 (Aug. 16, 1976). If a church plan has not elected to be ERISA-governed, ERISA’s remedies for causing an employer to fund a pension plan do not apply. Whatever tax law condition might apply might not motivate an employer to fund a plan. If a plan does not meet a condition for I.R.C. § 401(a) treatment, the IRS could apply Federal tax laws as if a plan is not a qualified plan. But the IRS might be reluctant to do so: Initiating an examination that relates to a church requires extra supervisory and executive approvals within the IRS. Developing proof that a plan is insufficiently funded such that it does not meet a condition of § 401(a) treatment under the Internal Revenue Code of 1954 as amended through September 1, 1974 involves unusual and burdensome work. Denying an employer an income tax deduction for contributions to a plan might have little or no practical effect on a church. Treating a plan as not tax-qualified might burden employees, retirees, and beneficiaries.

Even for a plan that is none of a governmental plan, a church plan, or an excess-benefit plan (and meets no other exception from ERISA’s title I), ERISA § 206 [29 U.S.C. § 1056] (which includes ERISA’s provision for following a qualified domestic relations order) does not govern “a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees[.]” ERISA § 201(2), 29 U.S.C. § 1051(2). Yet, if the plan is ERISA-governed (for parts 1 and 5 of subtitle B of title I), ERISA supersedes State law. ERISA § 514(a), 29 U.S.C. § 1144(a). A nongovernmental tax-exempt organization’s unfunded deferred compensation for select-group executives need not provide for recognizing a State’s domestic-relations order, and many do not. But even with no Federal law command, an organization administering its deferred compensation obligations might voluntarily recognize a domestic-relations order if the order satisfies the obligor. For those plans regarding which an organization recognizes an order, some require more detailed conditions than ERISA § 206(d)(3) sets for a QDRO, but some tolerate a less detailed order. Some might rely on a court’s acceptance of the divorcing parties’ settlement agreement, even without a separate order. (Some might be surprised by how often an organization acts contrary to its lawyer’s advice, or without any lawyer’s advice.) A nongovernmental tax-exempt organization might allow a transfer between divorcing spouses if the organization finds its obligation to the original participant is satisfied or released. This is not advice to anyone.

About an employer’s W-2, 1099-MISC, or other wage or tax-information reporting and withholding (if any might be or become needed), consider that there might be no service provider obligated to provide a service regarding the employer’s obligations for deferred wages. Or if a service provider is engaged to tax-report payments of deferred wages, consider the scope and conditions of the service engaged. Those might leave with the employer anything that did not involve a payment processed through the service provider’s system. This is not advice to anyone.

At least for an ERISA-governed employee-benefit plan, a plan’s governing documents might state provisions about what’s recognized or precluded as a plan amendment. Following those provisions, many kinds of writings might amend (or amend again) an employee-benefit plan. To show differing ends of a spectrum, imagine “the” plan document states this: “The Plan Sponsor may amend the Plan by any writing that is under relevant law an act of the Plan Sponsor.” Under a Supreme Court precedent, that’s enough to state an ERISA § 402(b)(3) plan-amendment procedure. Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 18 Empl. Benefits Cas. (BL) 2841 (Mar. 6, 1995) (by O’Connor, J. for a unanimous Court) (Stating as little as “[t]he Company” may amend the plan is enough to meet ERISA § 402(b)(3)’s two requirements—that a plan “provide a procedure for amending [the] plan, and [a procedure] for identifying the persons who have authority to amend the plan[.]”), available at https://tile.loc.gov/storage-services/service/ll/usrep/usrep514/usrep514073/usrep514073.pdf. Or imagine a custom-drafted plan states this: “Only the Plan Sponsor can amend the Plan, and can do so only by a writing that (i) includes a caption that describes the writing as an amendment of this Plan; (ii) is signed by the Plan Sponsor’s duly appointed and then currently serving president; and (iii) states on that writing, not as an attachment, that signer’s acknowledgment of that writing in the physical presence of a Notary Public.” Many plans, perhaps especially those stated using a recordkeeper’s or third-party administrator’s IRS-preapproved document, likely are somewhat closer to the first illustration. As QDROphile suggests, an answer might turn on reading a whole series of writings that might state or amend the plan. And as QDROphile reminds us, the law of corporations (or other business organizations), agency, and contracts all could be relevant to discern what is or isn’t a plan amendment. (The underscoring is not mine.)