Peter Gulia

I see in Notice 2026-49 nothing that undoes Revenue Ruling 2014-9’s interpretation that a receiving plan’s administrator looking to a distributing plan’s most recent Form 5500 report or return (if there is one) and finding the absence of a code showing that the plan is not intended to be tax-qualified can be a good-enough effort to presume that the distributing plan likely is intended to be tax-qualified. It seems odd that an IRS-suggested form would call a distributing plan’s administrator to state that the plan is tax-qualified when the Treasury’s rule calls it enough for a receiving plan to get the distributing plan’s statement “that Plan O is intended to satisfy the requirements of section 401(a) and that the administrator of Plan O is not aware of any Plan O provision or operation that would result in the disqualification of Plan O[.]” 26 C.F.R. § 1.401(a)(31)-1/Q&A-14(c) Example 2 https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR6f8c3724b50e44d/section-1.401(a)(31)-1.

Paul I and G8Rs, thank you, each and both, for your excellent teaching!

Today, a client sent me a package of what its recordkeeper labels “your SECURE 2.0 Act Interim Amendment.” The package describes this as “changes from your Cycle 3 qualified retirement plan.” BenefitsLink neighbors, I’d welcome your help so I learn some contours about a plan sponsor’s uses of documents of this kind. Am I right in guessing that an interim amendment does not get an IRS imprimatur like the IRS opinion letter that results from an on-cycle review of IRS-preapproved documents? Am I right in guessing that an interim amendment—even if the documents’ designer built it from the IRS’s Listing of Required Modifications—does not get any IRS assurance? A user may not rely on the IRS opinion letter that accompanies an IRS-preapproved document unless the user makes no change beyond those expressly allowed within the document or by an IRS Revenue Procedure about preapproved documents. But what if an interim amendment states a provision on a point nowhere even mentioned in the preceding cycle’s IRS-preapproved documents? Without defeating reliance on the most recent IRS opinion letter, may a user change a provision the IRS never vetted? I don’t yet know whether anything might call for even considering a change. But here’s why understanding the rules matters. If a change would defeat reliance, I might narrow the scope of my review and spend less of my client’s money and attention. Or if a change would not defeat reliance, I can, before I start work, ask my client how much or how little it wants me to review. And knowing the rules I might have better knowledge to form my advice about whether a change might be worthwhile. I know many plan sponsors never seek a lawyer’s review of what a recordkeeper or other service provider has presented. But for those of us who are asked, the client and the lawyer together need to define what the lawyer is looking for, and, often more important, what not to consider. I understand that I alone am responsible for any advice to my client.

If a distributing plan refuses to sign a statement that the plan is tax-qualified, how does a receiving plan react to that? Does a receiving plan accept a statement that the distributing plan is intended to be tax-qualified?

Pam Shoup, thank you for your useful catalog of some difficulties. (I know from experience that there are many more.) The frustrations you mention might be a meaningful part of why someone asked Congress to legislate that the Internal Revenue Service publish guidance. “A notice is a public pronouncement by the IRS that may contain guidance that involves substantive interpretations of the IRC or other provisions of the law. Notices may be used in circumstances in which a revenue ruling or revenue procedure would not be appropriate. In addition, notices may be used to solicit public comments on issues under consideration, in connection with non-regulatory guidance, such as a proposed revenue procedure.” Internal Revenue Manual 4.10.7.2.4.1(1)(b)[3] (Sep. 12, 2022). I suspect retirement plans’ administrators and their service providers might need much more persuasion than whatever exhortation IRS Notice 2026-49 might suggest.

Globalization Partners’ advertising suggests that an aspect of their service is guidance about “international norms and practices[.]” https://www.globalization-partners.com/book-demo-lp/?utm_keyword=globalization%20partners&utm_device=c&utm_matchtype=e&msclkid=15028c2078481df198eee65f20427130&utm_source=bing&utm_medium=cpc&utm_campaign=usa__search__branded__%5Ben%5D&utm_term=globalization%20partners&utm_content=branded. One imagines its competitors too offer suggestions about balancing business goals, including: obeying each set of national and subnational requirements, meeting any contract requirements the employer-of-record imposes, setting compensation (including benefits) to attract the workers the service recipient wants, and setting compensation (including benefits) to meet the service recipient’s budget. Whether one seeks or eschews reasonable parity across nations might relate to one or more of those factors. While my former and current clients have workers in many nations, none has used an employer-of-record service, so I lack the experience you’re seeking.

Let’s imagine the one-participant plan is not governed by ERISA’s title I but is described in Internal Revenue Code § 4975(e)(1)(A). So, a prohibited transaction (if any) might be a § 4975(c)(1)(D) prohibited transaction. The Labor department’s rule, Definition of “plan assets”—participant contributions, states that it applies “[f]or purposes of . . . section 4975 of the Internal Revenue Code[.]” 29 C.F.R. § 2510.3-102(a)(1) https://www.ecfr.gov/current/title-29/part-2510/section-2510.3-102#p-2510.3-102(a)(1). That’s logically consistent with President Carter’s 1978 Reorganization Plan. A disqualified person might look to that rule’s interpretation to support a tax-return position. Under that interpretation, an amount to be treated as a participant contribution need not be treated as plan assets until “the 7th business day following the day on which such amount would otherwise have been payable to the participant in cash (in the case of amounts withheld by an employer from a participant’s [self-employment income or] wages[.]” 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). If one treats Wednesday, December 31, 2025 as both the segregation date and the payday, a participant-contribution amount might not have become plan assets until January 12, 2026. I do not say this reasoning is correct. I suggest only that some might reason this to support a nonfrivolous tax-return position. As always, a disqualified person should get its lawyer’s advice. This is not advice to anyone.

The steps and forms the IRS suggests involve a “certification” some plans’ administrators might be reluctant or unwilling to state. Form 2: Receiving Plan’s Request to Distributing Plan would state: “To the best of my knowledge, . . . the Receiving Plan is tax-qualified[.]” Form 3: Distributing Plan’s Rollover Certification would state: “To the best of my knowledge, . . . the Distributing Plan is tax-qualified[.]” I recall when many people were unwilling to sign such a statement; is that still a problem?

Bri, thank you. I get the difficulty about a distributing plan that still has a spouse’s-consent condition. So I learn something: About trustee-directed pooled assets, is the difficulty that such a plan often lacks daily valuation and might impose monthly, quarter-yearly, or yearly intervals and valuation dates to measure a distribution? Or is it something else? BenefitsLink neighbors, what other hang-ups happen in dealing with rollovers?

Can we simplify rollovers between retirement plans? Here’s yesterday’s prepublication release of IRS Guidance on Section 324 of the SECURE 2.0 Act with Respect to Rollovers, Notice 2026-49, 2026- -- I.R.B. --- (---, 2026), https://www.irs.gov/pub/irs-drop/n-26-49.pdf The Notice suggests a step-by-step way for a receiving plan to get information and money from a distributing plan. The Notice includes sample forms. Will this work?

I checked the definition of highly-compensated employee in the basic plan document of a widely used recordkeeper’s set of IRS-preapproved document. It states expressly that compensation to determine who is a highly-compensated is not according to the plan’s definition of compensation but rather according to Internal Revenue Code § 414(q). That subsection states “‘compensation’ has the meaning given such term by section 415(c)(3).” I.R.C. § 415(q)(4). Your mileage may vary.

BenefitsLink neighbors, I don’t read metsfan026’s inquiry as asking about what nonelective contributions and opportunities to restore elective and matching contributions the participant gets regarding one’s absence for military service. Rather, I read the inquiry to ask whether determining highly-compensated status for 2025 by looking to 2024 compensation looks to the amount the participant received during 2024 or considers an amount for as-if compensation approximated under USERRA’s provisions for counting deemed compensation on which to determine USERRA benefits and opportunities. The Treasury’s temporary interpretation suggests the I.R.C. § 414(q) measure looks to the compensation the participant received (without USERRA-deemed compensation). 26 C.F.R. § 1.414(q)-1T https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR686e4ad80b3ad70/section-1.414(q)-1T. Does anyone read that rule or the statute it interprets differently? A plan’s administration might need two or more measures of compensation, distinguishing compensation to measure required or permitted contributions and compensation to determine who is or isn’t treated as highly-compensated in the next year. This is not advice to anyone.

For those who dislike allowing a § 128 contribution as an element of a § 125 cafeteria plan: The comments period on the Treasury’s proposed interpretation is open. The Secretary of the Treasury or his delegate might not complete the rulemaking during the currently serving Secretary’s administration. A final rule published in 2028 might be vulnerable to a 2029 undo using the Congressional Review Act. If an employer likes an opportunity to allow a § 128 contribution as an element of a § 125 cafeteria plan: Yesterday’s notice states: “Taxpayers may rely on these proposed regulations for plan years beginning before the date final regulations are published in the Federal Register.” Unlike statutes about which a litigant beyond the government might assert a claim and a court might interpret a statute differently than an executive agency’s interpretation, only the Internal Revenue Service seeks enforcement of Federal income tax law. So, an employer might not fear that the IRS would deny § 125 treatment for an otherwise proper cafeteria plan because the plan allows a § 128 contribution allowed under the Treasury’s proposed interpretation. This is not advice to anyone.

If the retirement plan sponsor or any of the four participating employers gets its lawyer’s advice, letting that corporation follow its lawyer’s advice (if it can do so without interfering with the others) might be logically consistent for a service provider if it is not a law firm or other IRS-recognized practitioner and the service provider warns that it does not provide tax or other legal advice. To the extent that any of the plan sponsor or a participating employer does not get its lawyer’s advice, caution to follow the text of the IRS-preapproved document seems wise. The business format you describe—with each physician indirectly owning one’s stake in the shared firm through the individual’s corporation—suggests lawyers are (or at least were) on the scene. If you suspect the previous documenting about the participating employers was less than carefully considered, you might help some lawyers see caution. Professional-to-professional communication not in the client’s reading or hearing often is effective. Many good lawyers are glad to get a retirement-services provider’s knowledge and thinking. This is not advice to anyone.

When the retirement plan’s named fiduciary expects that all distributions will be tax-reported by the plan’s trustee or its agent (and that the plan will have no asset other than those held by a bank or trust company as the plan’s trustee or custodian), different lawyers, accountants, and other advisers give different advice about the wisdom or unwisdom of applying for a taxpayer identification number. Different service providers have different business practices about this. Consider falling in with your new employer’s practice, perhaps for no more reason than it is your employer’s practice. Or, to learn more about your new firm’s reasoning, ask.

Today’s proposed rulemaking interprets Internal Revenue Code of 1986 §§ 125, 128, 129. Under the proposed interpretation, a self-employed individual is not an employee for § 128, but is an employee for § 129, which includes nondiscrimination provisions partially included in § 128. The comments due date is September 25; the hearing is October 15. https://www.govinfo.gov/content/pkg/FR-2026-08-11/pdf/2026-16314.pdf Among the conditions for a Trump account contribution program is a written plan.

A retirement plan’s administrator or its service provider might prefer to act carefully to maintain a participant’s or beneficiary’s respect and good will. Doing so calls for at least respecting a proper claim for withholding at a treaty’s rate (including, if applicable, a zero). That might help a distributee avoid an otherwise unnecessary tax return. Many church plans provide communications to help a participant or beneficiary become aware of treaty-claiming opportunities. If a plan’s administrator or its service provider sees that a claim specifies a non-U.S. address but does not include a Form W-8BEN, someone might ask the claimant whether the omission is deliberate or inadvertent. A review of a withholding certificate typically does not investigate whether its statements of fact are true, but does check whether the administrator or payer knows a statement to be false or inconsistent with the plan’s records. While I am known for writing plan provisions beyond the norms, I doubt a mere plan provision could grant a § 403(b) plan’s insurer, § 403(b)(7) custodian, or § 403(b)(9) retirement income account administrator a power to withhold from a nonalienable distribution more U.S. Federal income tax than applicable law commands. Might it be simplest to follow the tax law rules? This is not advice to anyone.

Has your client searched all emails? Has your client searched service providers' emails. An email might be a writing. An email might include or confirm an electronic signature. This is not advice to anyone.

An employer might want its expert lawyer’s advice about: whether the California board that administers California’s law would accept or reject such an interpretation of the statute and its implementing regulations; and whether California’s Supreme Court would adopt the employer’s view as the correct interpretation of the statute. Yet, getting written advice an employer could rely on to defend its good-faith belief that it need not provide the CalSavers wage-deduction facility might be more expensive than merely falling in with the CalSavers regime. This is not advice to anyone.

A payer might check carefully whether a distributee’s withholding certificate: is completed according to the form and its instructions; is internally consistent; is logically consistent with facts known to the plan or its payer; does not present a statement the payer knows to be false; includes the supporting documentation the form or its instructions requires; shows nothing that suggests a false document or a forgery. Among other law sources, regulations to interpret and implement Internal Revenue Code of 1986 § 1441 are 26 C.F.R. §§ 1.1441-1 to -9. The table of contents for those sections is 26 C.F.R. § 1.1441-0, https://www.ecfr.gov/current/title-26/section-1.1441-0. The rules are complex, detailed, and include many internal definitions. In general: “A withholding agent must withhold 30 percent of any payment of an amount subject to withholding made to a payee that is a foreign person unless it can reliably associate the payment with documentation upon which it can rely to treat the payment as made to a payee that is a U.S. person or as made to a beneficial owner that is a foreign person entitled to a reduced rate of withholding.” 26 C.F.R. § 1.1441-1(b)(1), https://www.ecfr.gov/current/title-26/part-1/section-1.1441-1#p-1.1441-1(b)(1). Also, a payer might maintain a table or list with each nation’s income tax treaty withholding rate. Some payers’ systems integrate this in the distribution-processing software. Consider that applying 30% withholding without checking whether the distributee properly claims lesser withholding might deprive the distributee of a right under applicable law or the plan. This is not advice to anyone.

I read the problem AlbanyConsultant describes as someone having administered a plan under an assumption different than a provision of a document that might be or have been a document governing the plan. BenefitsLink mavens, if that's the situation, does it lead you to different observations?

In sorting through potential corrections, it might matter who told whom that an employee with fewer than 1,000 hours of service is not eligible for elective deferrals.

QDROphile, I’m unaware of any Federal court decision that imposed a liability on an ERISA-governed plan’s administrator because—even assuming the administrator’s actual receipt of a notice that a could-be alternate payee intends to soon submit a domestic-relations order—the administrator did not impose a segregation or “hold” regarding the participant’s benefit. I have not researched States’ courts’ decisions because I presume an ERISA-governed plan’s administrator will have done everything it can to: maintain ERISA’s supersedure; specify in its engagement of every lawyer that the lawyer has no authority to accept service of process; specify in its engagement of any service provider that the service provider has no authority to accept service of process, even if the service provider is engaged to provide a QDRO-review service; limit carefully which persons are authorized to accept service of process on the administrator, and write the summary plan description, QDRO procedure, claims procedure, and anything else to explain in plain language who may and who cannot accept service of process; assert a State court’s lack of jurisdiction, including at least a lack of subject matter jurisdiction; remove claims against the plan or its administrator to the Federal court; and apply the plan’s exclusive-forum provision. Likewise, an ERISA-governed plan’s directed trustee would assert those procedural protections and that the trustee lacks authority to decide a distribution. But that a plan’s administrator might be ERISA-protected in doing nothing until a domestic-relations order is submitted is only one of many factors I consider if I advise an ERISA-governed plan’s administrator. Different interests might matter regarding a governmental plan, or regarding a church plan that has not elected to be ERISA-governed.

For more ways to protect yourself, read my 10 tips for rewriting your service agreements yourself in ASPPA’s Plan Consultant magazine (Fall 2020).

“Extending the time to file does not extend the time to pay tax.” The instruction for Form 8868 part III line 1b states: “Enter the amount of tax estimated to be due with Form 5330[.]” Form 5330’s Part II has lines for the tax due, the amount paid with an extension or otherwise before filing the return, and the remaining tax due or overpayment. This is not advice to anyone.