Peter Gulia

Thanks. With your explanation, I see how some plans’ administrators and service providers might prefer not to separate communications from operations. And how some might prefer using cautious amounts until the IRS-announced amounts become available.

David Rigby, thank you for describing a different outlook. About your idea that a statute provides what it provides, and that a provision might not be conditioned on whether an executive agency publishes or omits some further act, there is at least some room for a range of interpretations. Even the now-overruled Chevron doctrine never required deferring to an agency’s interpretation of an unambiguous statute. Now, the Supreme Court’s Loper Bright Enterprises decision holds that a court may consider but does not defer to an executive agency’s rule that interprets a statute. But Loper Bright Enterprises left some room for what the parlance calls a legislative rule—one that implements Congress’s delegation to the agency. Further, reasoning minds differ about how to interpret or apply a statute that includes Congress’s direction that an executive agency do a specified thing. Some of the Internal Revenue Code’s many provisions about inflation adjustments, even if otherwise unambiguous, call for “the Secretary” to set the adjustment. For example: The Secretary shall adjust annually— (A) the $160,000 amount in subsection (b)(1)(A), (B) in the case of a participant who is separated from service, the amount taken into account under subsection (b)(1)(B), and (C) the $40,000 amount in subsection (c)(1)(A), for increases in the cost-of-living in accordance with regulations prescribed by the Secretary. Internal Revenue Code of 1986 (26 U.S.C.) § 415(d)(1) http://uscode.house.gov/view.xhtml?req=(title:26%20section:415%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section415)&f=treesort&edition=prelim&num=0&jumpTo=true; 26 C.F.R. § 1.415(d)-1 https://www.ecfr.gov/current/title-26/section-1.415(d)-1. Neither that paragraph of I.R.C. § 415(d) nor Treasury’s implementing rule specifies what amount applies if the Commissioner of the Internal Revenue does not publish in the Internal Revenue Bulletin an adjustment. Although I.R.C. § 415(d)(2)-(4) specifies the measures and formula, reasoning minds might differ about whether some act of the Treasury department or its Internal Revenue Service is or isn’t needed to set an adjustment. ****** About a fiduciary’s duty of communication, courts’ interpretations that a fiduciary should communicate information a participant needs to enable her to make informed choices suggest that in some circumstances a prudent fiduciary might prefer to communicate reasonably anticipated or estimated information, with an explanation that it is not yet determined. ****** At least some of the adjustments for 2026 seem obvious. For example, I don’t see how the § 414(v)(7) amount could be less than $150,000 (adjusted from $145,000). ****** Neither of 2018’s shutdowns—one that began January 20, and another that began December 22—resulted in furloughs during October, when ordinarily BLS assembles September inflation measures and IRS determines inflation adjustments. ****** BenefitsLink neighbors, do you have different or further observations?

About disfavoring estimates in participant communications: Do you disfavor it because you worry that, despite an “estimated” explanation, some readers might perceive an amount as somehow more settled than it is? If a worry is about what some readers perceive, why would communicating amounts that likely won’t apply for 2026 be better? Or, does a plan’s administrator communicate old amounts because one believes doing so somehow involves less discretion about what to communicate? What if the adjusted amount is almost a certainty? For example, if inflation through August was more than enough to surpass the next increment of rounding and any further inflation in September won’t be enough to meet another increment of rounding? Does that affect your thinking about whether to communicate an estimated amount? Or is your view about not communicating an estimated amount unaffected by one’s confidence in the estimate? These are open-inquiry questions. I seek to learn what BenefitsLink neighbors think about how to manage ambiguity.

Imagine there is a US government shutdown in October. (In the past 30 years, shutdowns were 1995—26 days, 2013—16 days, 2018—38 days.) Imagine the shutdown lasts through October. Imagine the Bureau of Labor Statistics report on inflation to September 30, usually released in October, is not released until late November. Imagine the Internal Revenue Service’s yearly notice of inflation adjustments for retirement plans, usually released in early November, is not released until mid-December. What steps would you change or delay while waiting for the IRS’s notice? Would you put estimates in your software? Or wait for the official notice? If there is a communication to send, would you: delay it, if it’s not required by 30 days before 2026? send it, but describe limits or factors without specifying an amount? send it, with estimates (flagged as estimated) for each inflation-adjusted amount? How else might a delay of inflation adjustments affect your work?

If the plan’s administrator has regularly used the accrual method of accounting for the plan’s financial statements and Form 5500 reports, why would a receivable or a payable be limited to a small amount? This is not advice to anyone.

The answer to my query is in a BenefitsLink discussion 2½ years ago. Paul I won the day. The penalty’s up-to amount remains $110. https://benefitslink.com/boards/topic/70445-what-is-the-penalty-amount-to-show-in-an-erisa-rights-notice/; 29 C.F.R. § 2575.502c-1 https://www.ecfr.gov/current/title-29/section-2575.502c-1, 62:45 Federal Register 40696 (July 29, 1997). The penalty is on an administrator’s failure or refusal to furnish ERISA-required information a participant or beneficiary requested. ERISA § 502(c)(1) [29 U.S.C. § 1132(c)(1)].

Some plan sponsors might not decide which deemed election (if any) to implement until there is an immediate need to apply one. For some situations, that might happen as soon as January. But for many typical situations that might not happen until 2026’s spring, summer, or autumn. Illustration: For 2026, Jill elects a deferral of $1,354.16 for each semimonthly pay period [$32,500 / 24]. Jill does not elect that any portion of that amount be made as Roth contributions. Jill would not exhaust 2026’s $24,500 limit on non-catch-up deferrals until the year’s 19th pay period. For the first 18 of 24 pay periods, the plan can credit Jill’s non-Roth deferrals.

I have sometimes suggested an employer/administrator file a Form 5500 even when the rules excuse it for a small one-participant plan. With other potential advantages, which might include starting the running of a statute-of-limitations period and setting up other defenses: An expense to file an unrequired Form 5500 might be less than the expense of informing EBSA or IRS about why a report or return for an earlier year was not required. This is not advice to anyone.

By now, many retirement-services people have learned that an applicability date of an executive agency’s rule that interprets Congress’s statute does not control when the statute applies. About the recently published catch-up rule, many articles explain that one follows the final rule by 2027, and for 2026 may defend a good-faith interpretation of the statute. Considering the opportunities and flexibilities the final rule allows, why not follow it for 2026 too? To do something beyond what the final rule allows, the employer and the plan administrator would need to think about what that something is and be ready to defend how one formed a prudent finding that it is a reasoned interpretation of the statute. Even if an interpretation need not be formed with an ERISA fiduciary’s prudence, a good-faith interpretation must be formed with at least the ordinary prudence that would be used by a business-prudent employer that is conscientiously seeking to follow tax law. Such an effort might be more expensive than simply following the final rule. And for a TPA, recordkeeper, or other service provider to maintain a pretense that it did not provide tax or other legal advice, might it be simpler to follow the final rule? Yet: BenefitsLink neighbors, if time, effort, and money were no constraint, is there anything you’d want to allow in 2026 that the 2027-applicable interpretation doesn’t allow?

At least one big recordkeeper can process a correction by crediting each specified amount on each specified past date according to each participant’s then-effective investment direction, using each fund’s actual share price or unit value for each date. If that’s what was done, would EBSA accept that explanation?

Although TPAs give lots of legal advice that relates to one’s work as a TPA, this participant’s question might be more fully addressed by his lawyer. Yet, with the caution that a prudent person ought to read the plan’s governing documents, the trust agreement or declaration (if the plan has a trust), the custody agreement (if the plan has a custodianship), each annuity contract, and anything more that might be relevant: One arrangement (if none of the documents precludes it) is to name the retirement plan’s trustee, including successor trustees, as an annuity contract’s holder and particularly intended third-person beneficiary. That way, the plan’s trustee uses an annuity contract’s rights, collects the insurer’s payments, and pays each plan beneficiary according to the plan’s provisions. Or, an annuity contract might be a substitute for what otherwise would be the retirement plan’s trust. See Internal Revenue Code of 1986 § 401(f)-(g), 26 C.F.R. § 1.401(f)-1 https://www.ecfr.gov/current/title-26/section-1.401(f)-1. If so, the plan’s administrator would name the plan beneficiaries as an annuity contract’s beneficiaries. Also, if the participant, before his death, begins an annuity measured regarding a life beyond the participant’s life, the insurer might require the contract’s holder to name the second annuitant—even when the insurer’s payee will be the plan’s trustee or custodian. For a life-contingent annuity, an insurer needs to know whose death ends the insurer’s obligation. This is not advice to anyone.

What is the ERISA penalty on a failure to furnish requested documents? Still $110 a day? Or inflation-adjusted again?

A § 401(a) retirement plan does not count § 457(b) deferrals in § 415 annual additions. For example, an individual in her early 60s might have 2026 retirement savings like this: (I assume my estimates of inflation-adjusted limits for 2026.) 457(b) deferral $36,500 (salary $40,000 as a retired government employee) 403(b) elective deferral $36,500 (salary $40,000 from a university lectureship) 401(a) nonelective $90,000 (compensation $360,000 as a 50% owner) $163,000 Observe that the § 401(a) plan’s annual additions do not count against the § 403(b) account’s annual-additions limit. 26 C.F.R. § 1.415(f)-1(f)(2)(ii) https://www.ecfr.gov/current/title-26/part-1/section-1.415(f)-1#p-1.415(f)-1(f)(2)(ii). In my experience, many government employees also have other employments and other businesses. This is not advice to anyone.

Yes. The communications regime I'm thinking of puts all communication about this in the summary plan description, and none in a separate writing. It's for the unusual employer that doesn't rely on its service provider and instead manages, with its lawyer's advice, the plan communications.

I meant burdened only in the sense of § 414(v)(7) depriving an individual of what otherwise might be her choice between Roth and non-Roth deferrals. (While I might share your view that many participants ought to prefer Roth for all or some of one’s deferrals, there are situations in which choosing non-Roth can be reasoned financial planning.) Anyhow, I wasn’t thinking about any individual’s preference, only whether § 414(v)(7) restrains a participant’s choice for the catch-up portion of a deferral. And “affected” is the language I advised for communications about the soon-to-be-applied tax law.

Also, the fiduciaries and the nonfiduciary parties in interest and disqualified persons (including, at least, the bank and its parent) would want extensive and intensive lawyering to get exemptions for the several prohibited transactions. This is not advice to anyone.

Here’s what I’m seeing: A small business might have a few nonowner managers subject to § 414(v)(7). For many law firms, § 414(v)(7) doesn’t burden the associates (because they’re not age 49), doesn’t burden the partners (if they’re self-employed individuals), and might burden a nonpartner senior counsel (but most of these are younger than 49). Section 414(v)(7) burdens those of the nonlawyer assistants who are 49 or older. For a university, § 414(v)(7) burdens those in the faculty or administration who are 49 or older. For a governmental employer, § 414(v)(7) tends to affect department heads. For a big financial-services business, § 414(v)(7) can affect thousands of participants. Of course, what I’m seeing might not reflect workforces as a whole.

Paul I and RatherBeGolfing, thank you for your great help! I knew this call for a communication (only the recordkeeper describes it as a “notice”) is an aspect of using IRS-preapproved documents, and is not directly specified in the Internal Revenue Code or a Treasury rule. I don’t read the recordkeeper’s explanation of the IRS’s condition, or the plan documents’ provision, as precluding delivering the information before the contribution is made, or even before the beginning of the period, likely a whole year, regarding which the contribution is determined. The SPD describes, with all details, the anticipated allocation of the matching contribution, and tells a reader that a change (if any) will be explained in a revised summary plan description. If there is a change (likely an increase), the administrator would deliver a revised summary plan description promptly after the plan sponsor decided the change, and no later than when the contribution is credited to participants’ accounts. If the IRS’s condition is no later than 60 days after the contribution is made, there would be no risk of missing that timing.

The Treasury department’s notice of proposed rulemaking about qualified tips is scheduled to be published Monday, September 22. The prepublication text is available at https://public-inspection.federalregister.gov/2025-18278.pdf. For my law practice, this is only an academic curiosity. Does anything in this proposed rule change how a retirement plan’s administrator counts an employee’s compensation?

For 2026, Internal Revenue Code § 414(v)(7) burdens only a participant who: had, from the employer that maintains the plan, 2025 Social Security wages (not counting self-employment income as a partner or member) more than $150,000 [$145,000 inflation-adjusted]; and is (or by the end of 2026 will be) 50 or older; and might need an age-based catch-up to support her deferrals. For your typical client plan, how many people is this?

David D, thank you, this is what I'm asking about. Does the IRS require that the (2) information to participants be a separate notice? Or is it enough to put it in the summary plan description?

Lois Baker, thank you for useful information on the “buried” difficulties I’m working on about other plan provisions and communications. BenefitsLink neighbors, any help on my question about whether the way one discloses information about a discretionary contribution affects reliance on an IRS opinion letter?

In a package of documents accompanying an adoption agreement to use a set of IRS-preapproved documents, a service provider furnished a “Discretionary Matching Contribution Notice” with this description: “This form describes the formula used if any discretionary matching contributions are made to the plan. This notice must be provided to each participant who received a discretionary matching contribution no later than 60 days following the date the last contribution is made to the plan for the plan year.” The plan’s sponsor/administrator does not use the service provider’s assembled summary plan description. Also, it does not use a summary of material modifications. Instead, we write and deliver an updated summary plan description before each year, and more often than yearly if there is a change. Rather than a distinct “notice”, the plan’s sponsor/administrator would prefer to include the content about discretionary matching contributions in the SPD (and omit anything separate). Does anything about reliance on the IRS’s opinion letter preclude delivering the information that way? Does anything about in a basic plan document preclude delivering the information that way? Is there another reason it would be unwise to deliver the information that way?

The tax-law condition that a higher-wage participant’s age-based catch-up deferrals must be Roth contributions (or not made) begins with 2026.

I’ve worked on reconstructing (at once) more than 20 years’ plan reports and financial statements. If one decides to use the delinquent-filer program, assemble completely all years’ Form 5500 reports before submitting anything. Test them for EBSA’s edit checks. Test each report for internal logical consistency. Test all the reports for year-to-year and other logical consistency. Consider also that the business organization and its owner (and we guess those are the plan’s administrator and trustee) might want the evidence-law privilege for confidential lawyer-client communications. For work not done by the lawyer or her assistants, consider having the lawyer engage the third-party administrator under a Kovel arrangement to preserve that confidential-communications privilege. This is not advice to anyone.