Peter Gulia

For other participants who had a bonus (and had compensation smaller enough that counting the bonus would not exceed the § 401(a)(17) limit): Did the employer apply a participant’s specified percentage, whether for an elective deferral or an employee contribution, to the payroll that was or included the bonus? Or did the employer uniformly not take participant contributions from the bonus pay?

Employee Stock Ownership Plan Answer Book. The authors, with experience (Ballard Spahr and Vedder Price) setting up ESOPs, organize this pleasantly trim book, with the information easy to find in Q&A format. Most law firms buy this treatise in internet format, but Wolters Kluwer publishes also the hardbound book. You might like the internet version, with hyperlinks to the cited ERISA and Internal Revenue Code sections, regulations, agency interpretations, and other sources. While you wouldn't want those details for your first read, the hyperlinking (and functions for lifting and pasting citations) is handy when you're working on a task for a client. https://law-store.wolterskluwer.com/s/product/employee-stock-ownership-plan-esop-answer-book-3-mo-subvitallaw-3r/01t0f00000J3FC0AAN

Might a could-be defendant prefer a might-be plaintiff’s delay? Might a delay help time-bar some claims under a statute of limitations, statute of repose, or even laches?

An important starting point for an ERISA-governed plan’s administrator or other fiduciary is: “[A] fiduciary shall discharge his duties with respect to a plan . . . in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this title [I] and title IV.” ERISA § 404(a)(1)(D), 29 U.S.C. § 1104(a)(1)(D). A plan’s governing document might grant the plan’s administrator some discretionary authority to construe or interpret ambiguities in the plan’s text. But that is not authority to deviate from what the plan provides. Further, if a governing document’s grant of discretionary authority to interpret the plan is, ostensibly, so wide that it would allow an administrator other fiduciary to ignore or vary a plan provision, a fiduciary is duty-bound not to apply that portion of the discretion that would be inconsistent with ERISA’s command: “Every employee benefit plan shall be established and maintained pursuant to a written instrument.” ERISA § 402(a)(1), 29 U.S.C. § 1102(a)(1). This is not advice to anyone.

If you use a service provider’s materials, apply your own sense to a classification of a provision as mandatory or optional. Some service providers classify a SECURE 2019 or SECURE 2022 tax law change as “mandatory” for the business to provide services most customers likely call for, or that are essential to how the provider’s systems operate. For example, about the tax law change that permits a plan to provide for a § 401(a)(9) required beginning date an applicable age of 73 or 75, at least one big recordkeeper classified this as mandatory. But a plan may provide, without failing to meet § 401(a)(9), an applicable age of 72, 71, 70½, 70, or even younger (if it doesn’t provide an involuntary distribution before normal retirement age). So, I might classify the change to 73/75 as optional. By contrast, a provision about whether some beneficiaries must complete a distribution within ten years from the participant’s death might, depending on the plan’s other provisions, be needed to tax-qualify. Also, some of the service providers’ outlines don’t show completely or conspicuously an exception or variation for a governmental plan. If your work is about a governmental plan, consider that the State’s laws might restrain which provisions must, may, or must not be included or omitted. Those laws might include an enabling statute that grants, and limits, powers to establish and maintain a § 403(b) or other retirement plan. And it might include laws about collective bargaining or discussion with associations of employees and retirees. Those laws might make required or obligated a provision that under Federal tax law is optional. Further, consider that some provisions might be stated by an annuity contract or a custodial account, rather than in “the” plan document.

Does anything preclude a PEP or other MEP from providing that assets and obligations attributable to a no-longer-participating employer remain with the plan?

For governmental plans, a top lawyer is Carol Calhoun, a lead author of Governmental Plans Answer Book. https://www.venable.com/professionals/c/carol-v-calhoun

If anyone might help, consider Connecticut attorney Linda Ursin. Among other reasons, her website mentions some opportunity to change a property settlement if a party can show fraud. https://www.ursinlaw.com/modification-of-property-settlement/ This is not advice to anyone.

austin3515’s query and RatherBeGolfing’s information suggest yet another awkwardness about administering a plan (on this point, starting as soon as January 1, 2025) according to one’s assumptions about the text of a document to be made years later. Imagine austin3515’s client in 2025 and 2026 allows age 50 catch-up, but does not allow age 60-63 catch-up. Imagine the plan sponsor later finds that, in the IRS-preapproved documents set, the adoption agreement form’s only choice for catch-ups is both or neither. Imagine it’s then too late and impractical for austin3515 and the client to switch to a different vendor’s IRS-preapproved documents that allow a user to specify age 50 catch-up without age 60-63 catch-up. Imagine the plan sponsor signs document that provide both kinds of catch-ups. Might someone say the plan’s administrator in 2025 and 2026 failed to administer the plan according to the remedially-amended written plan? Or might someone say the plan’s operation was within the administrator’s reasonable assumption about what the remedially-amended plan would provide? Or might someone say the provision for allowing both kinds of catch-ups is not retroactive? How many legal fictions does the remedial-amendment regime call for?

Many practitioners have advised there is little need for a plan to provide nonelective or matching contributions as Roth contributions if the plan lets a participant direct an in-plan rollover to Roth. And many dislike some complexities of Roth-ing nonelective or matching contributions. Yet, there are employers that, having heard those explanations, still want to provide the new Roth nonelective or matching contribution. The outcomes might not be exactly the same because of timing and investment markets’ differences. Those participants who direct an in-plan rollover to Roth might do it only once a year. The new feature lets a contribution be Roth-classified when the contribution is allocated. If the employer’s nonelective or matching contribution is allocated more often than once a year, the timing differences might matter. And even if timing and investment differences are meaningless, some employers feel strongly that participants want the convenience of Roth-ing from payroll, not needing to remember to instruct periodic rollovers. One lawyer advised a plan sponsor not to adopt Roth contributions (other than rollover contributions) beyond the currently provided elective deferrals until: The recordkeeper makes a service agreement obligation to credit the contributions according to what would become the plan’s provisions. The recordkeeper delivers to the employer and to the plan’s administrator an independent certified public accountant’s report explaining the recordkeeper’s procedures and controls for crediting those contributions. The employer has designed and tested its procedures and controls for allocating the nonelective and matching contributions between non-Roth and Roth contributions. The employer has designed and tested its procedures and controls for communicating to the recordkeeper the instructions for non-Roth and Roth nonelective and matching contributions. This is not advice to anyone.

If the plan’s administrator (or other responsible plan fiduciary) had approved the service provider’s distribution-processing fee (including for plan-termination distributions), applying the approved fee might be a reasoned method. Think carefully about what the resulting Form 1099-R tax-information report will look like. Will the trustee’s, custodian’s, or other payer’s software generate a 1099-R report if a distribution’s amount is $0.00? Think about how the plan’s administrator (usually, the employer) will make and keep evidence that each zeroed-out distributee was paid all that was due her. This is not advice to anyone.

While my observation is limited by situations my clients have told me about, I never heard that an EBSA investigator asserted that a summary annual report was untimely because filing the Form 5500 report by its unextended due date meant there was no extension of the time for delivering the related SAR.

What is this participant’s age? Has she reached normal retirement age (under the plan’s provisions)? Has she reached the plan’s required beginning date? If she reached normal retirement age, does the plan require an affirmative election if one prefers to delay the pension? Or does the plan treat the absence of a claim as an election to delay? This is not advice to anyone.

An advantage of getting an extension of the time for filing a Form 5500 report (even if the plan’s administrator believes none of the extra time will be used) is setting up a delay about when one must deliver the summary annual report. Some administrators prefer to bunch all yearly communications into one delivery. Imagine a calendar-year plan that delivers in November or by December 1: • summary annual report (for the year ended almost a year ago), • revised summary plan description or summary of material modifications, • 401(k)/(m) safe harbor notice, • notice of automatic contribution arrangements, • notice of qualified default investment alternative, • notice about diversifying out of employer securities, and • rule 404a-5 information about account fees and investment expenses. Some might question whether bunching this many communications is appropriate disclosure. But for a plan that has a meaningful number of people who get paper, rather than electronic, disclosures, the efficiencies and expense savings might make this prudent.

If the seller’s former employees and their beneficiaries are covered by the seller’s health plan after those former employees no longer are the seller’s employees, which person—seller or buyer—pays an employer’s expense, and which gets income tax deductions?

Don’t assume; read the pooled employer plan’s participation agreement and all documents that affect relations and allocations of responsibilities between the PEP’s administrator and the participating employer. One might be surprised by how many responsibilities a PEP’s documents can allocate to a participating employer.

Doesn't the plan-termination amendment that already was done provide that the final distribution that ends the plan is a single-sum distribution of the participant's, beneficiary's, or alternate payee's whole account? Else, how would one end a plan?

Here’s the tax law point your query seems to ask about: “Such term [an “eligible employer”] shall not include an employer if, during the 3-taxable year period immediately preceding the 1st taxable year for which the credit under this section is otherwise allowable for a qualified employer plan of the employer, the employer or any member of any controlled group including the employer (or any predecessor of either) established or maintained a qualified employer plan with respect to which contributions were made, or benefits were accrued, for substantially the same employees as are in the qualified employer plan.” Internal Revenue Code of 1986 (26 U.S.C.) § 45E(c)(2) (emphasis added). I.R.C. § 45E(d)(2)’s definition for an “eligible employer plan” refers to “a qualified employer plan within the meaning of section 4972(d).” I.R.C. § 4972(d)(1)(A)(iv) includes among four kinds of qualified employer plans “any simple retirement account (within the meaning of section 408(p)).” There is no Federal tax law rule or regulation that interprets Internal Revenue Code § 45E. Ask your tax lawyer or certified public accountant about what fits or doesn’t for your circumstances. Understand that many retirement-plan practitioners (deliberately) don’t provide advice about the § 45E tax credit. This is not advice to anyone.

Your firm should buy Derrin Watson’s Who’s the Employer? The first time you use it will save you from incorrect advice or missed opportunities, either of which can be malpractice. Each next time, you’ll work more efficiently so you and the partners won’t waste unbillable time.

ERISA § 404(a)(1)(D) commands a plan’s administrator to administer the plan according to the written plan. And Internal Revenue Code § 401(a) or § 403(b) too in concept calls one to administer such a plan according to its written plan. Yet, tax law’s so-called remedial-amendment regimes tell a plan administrator not to rely on the written plan but rather to follow one’s assumptions about a to-be-written plan the plan sponsor might not make until December 31, 2026. The document “with an approval date of 8/7/2017” one imagines has text that states provisions no later than those of 2016. For about ten years, a plan’s administrator must discern which provisions of the written plan remain applicable and which provisions one presumes will be retroactively changed or added, discerning these differences with nothing in the text of the written plan say which is which. What purpose does “the” plan document serve?

Is the distribution-processing fee $100? Or is some other expense charge also involved? What does the plan’s governing document provide? What does the summary plan description explain? What does the most recent 404a-5 communication disclose? Does the recordkeeper process, and the payer tax-report, a Form 1099-R showing a distribution of $0.00? For each service provider involved, what does its service agreement provide?

I know those who do the TPA, recordkeeping, or operations work abhor the PLESAs. But my note above isn’t an idle hypothetical; its question is a live one from a real employer (not my client, but my client’s client). Although my client tried to talk the employer out of providing PLESAs, the employer persists in seeking to provide it (and has its own business reasons for desiring to do so). Is it proper to charge the PLESA accounts a bigger share of plan-administration expenses than is charged against non-PLESA accounts?

It’s regrettable that an IRA’s beneficiary let a custodian combine accounts with different histories and attributes. (Did the beneficiary, whichever one is your advisee, assent, expressly or impliedly, to the combination of accounts? Has the time for objecting to an account statement or transaction confirmation run out?) An adviser might warn one’s advisee that an individual remains responsible for correct minimum distributions, even if a custodian’s accounting no longer provides needed information. Yet, an adviser who’s comfortable with full-picture counseling might explain also that the IRS has little resources to detect mistakes in the amounts of minimum distributions. An adviser would provide advice that fits with one’s professional conduct. This is not advice to anyone.

A plan sponsor, an employer, or a plan administrator might prefer to show as its address an address at which the person wants to receive mail. It could be bad if EBSA or IRS sends a notice to the address shown on the most recently filed Form 5500 report, the employer or administrator does not get the notice, and is charged with having failed to respond timely to the notice. I have worked on matters in which the plan’s administrator, as a safety caution, was unwilling to show an address of where the employer or administrator worked. In one, the Form 5500 reported a lawyer’s office address. In another, the administrator rented a Post Office box and put that address on the Form 5500. This is not advice to anyone.

Imagine an individual-account (defined-contribution) plan for which the employer never pays any plan-administration expense; all is borne by individuals’ accounts. Imagine the plan includes an arrangement for pension-linked emergency savings accounts. Assume the ERISA § 801(c) conditions for a PLESA make it more expensive to administer those accounts than the non-PLESA accounts. While honoring the constraint against a charge for a PLESA account’s distributions, may the plan’s fiduciary set different plan-administration expense allocations between the PLESA and non-PLESA accounts?