Peter Gulia

I can't remember the last time I saw a recordkeeper's platform list that lacked funds that advertised Sharia compliance, a Christian focus, and other religious themes. Meeting a participant's interest might be less expensive than learning what duties might exist and how they might apply.

I've worked with this plan for 17 years. A final-four accounting firm does a full set of coverage and nondiscrimination tests. I've never heard a moment's trouble. You're right; it's about the nature of the business and the workforce.

Even if the Internal Revenue Service publishes the nonenforcement guidance American Retirement Association seeks, that would not preclude a participant, including a should-be participant, from enforcing ERISA § 202(c) and ERISA § 203(b)(4). Reorganization Plan No. 4 of 1978 transfers to the Treasury department powers to interpret ERISA sections 202 and 203. But that does not undo a participant’s ERISA § 502(a) civil-enforcement opportunities. Even if the IRS might not pursue failures of conditions for tax-qualified treatment, plans’ administrators and their advisers should continue their interpretations of what ERISA’s title I commands.

Even if no other notice is mandated or chosen in the fiduciary’s prudence, an individual-account retirement plan’s discontinuance and later termination usually results in a final distribution, which typically is an involuntary distribution and is an eligible rollover distribution. Some retirement-services people use “plan-termination notice” to describe a notice about those points.

If a plan sponsor adds an automatic-contribution arrangement and wants it to apply to less than all eligible employees, one might specify carefully which employees are benefited or burdened by the implied election (or which are not). If the plan sponsor uses IRS-preapproved documents, one might evaluate whether a particular set of documents allows enough choice to specify the intended provision without defeating reliance on the IRS opinion letter.

And alumni privileges with your college or university.

MoJo and RatherBeGolfing, thank you for your helpful thinking. For the potential situation I haven’t yet advised on, here’s the employer’s definition or classification: An intern is anyone who lacks a baccalaureate degree. I can imagine arguments for and against considering this a subterfuge for a service condition. Here’s just one in each direction. For: Many interns work only seasonally or part-time because it’s demanding to be a full-time employee and a good student. Against: Many interns work a full-time job and do so even when taking a full load of courses in each of fall, spring, and summer semesters. About a particular plan I’m preparing to advise about, it’s awkward to think about whether a classification might be a subterfuge for a service condition because the plan has no service condition for an employee’s eligibility. I worry somewhat more that this employer’s classification might be seen as an indirect age condition. While it’s possible to start college at a young age (for example, 16) or finish in fewer than four years, a norm is to start around 18 and finish around 22. And a delay or interruption might mean finishing at a yet older age. If a plan’s design were my decision, I’d make every intern—even those who don’t meet § 401(k)(2)(D) conditions—eligible for elective contributions. But it’s not my decision, and I want to get ready to give full-picture advice.

And here’s a thread on which I posed some similar questions: https://benefitslink.com/boards/topic/71371-ltpt-proposed-regs-issued-by-irs/#comment-334692 May the plan’s administrator exclude an intern under the plan’s intern exclusion? This would mean finding the intern exclusion is not a proxy for an age or service condition. Or should the plan’s administrator reason that the intern exclusion “has the effect of imposing an age or service requirement” and treat a three-peat intern as eligible for elective contributions? If the plan sponsor now amends the plan to make every intern—even those who don’t meet § 401(k)(2)(D) conditions—eligible for elective contributions (but not for matching contributions, nor for nonelective contributions), would any unwelcome consequence result? (Assume neither the plan sponsor nor the employer worries about how this change would affect an ADP test or an ACP test.)

Asrar Ahmed, ERISA and Sharia Law, 21-1 Journal of Pension Benefits 5-13 (Autumn 2013). Among the article’s observations: “ERISA Section 404(c) provides an opportunity to relinquish the burden of investment decision-making and a defense to a claim of fiduciary breach that allows a plan fiduciary to limit his exposure to liability by shifting the responsibility of directing the investments to the participant.” BenefitsLink neighbors, if you subscribe to a Wolters Kluwer VitalLaw® suite, the Journal of Pension Benefits, including back issues, might be in your subscription. Over the past 11 years, Asrar Ahmed has steadily risen in the U.S. Labor department.

Here’s a more recent BenefitsLink discussion with some different observations: https://benefitslink.com/boards/topic/69943-religious-exemption-from-plan-participation/. If a plan’s menu already is broad enough and prudently selected and arranged, adding another investment alternative because some participants want it might be no breach if the fiduciary prudently finds that the availability of that alternative does not harm other participants. As always, a plan’s fiduciary will want its lawyer’s advice.

Perhaps these two rules might help you answer some aspects of your question. Interpreting the Employee Retirement Income Security Act of 1974’s title I: 29 C.F.R. § 2520.104b-31 https://www.ecfr.gov/current/title-29/part-2520/section-2520.104b-31#p-2520.104b-31(a); Interpreting the Internal Revenue Code of 1986: 26 C.F.R. § 1.401(a)-21 https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)-21#p-1.401(a)-21(a). These rules set conditions for using electronic communications to meet some notice requirements. But a communication that meets these rules might not be enough for a communication about a plan’s end and final distribution. Among other points, a plan’s fiduciary might evaluate risks that some participants, beneficiaries, or alternate payees might fail to read an electronic communication.

As Luke Bailey suggests, I imagine the situation you describe involves an IRS-preapproved documents set and the IRS’s opinion letter on it. While we haven’t seen the plan documents, service agreement, and other facts of your situation, here’s another point that could become relevant in some situations. Even if both old and new TPAs are licensees of the same plan-documents publisher, don’t assume a document would be constant. A publisher (ASC, Datair, FIS Relius, ftwilliam, McKay Hochman, etc.), working from the same “chassis” for a kind of plan document, might make many different versions. Even with nonexclusive licenses, different TPAs might have licensed different versions. Further, a recordkeeper or third-party administrator (perhaps a “bundled vendor”) might get a publisher to make a custom version. For that version, the TPA might get the whole copyright, share the copyright, or get rights to enforce the publisher’s copyright. Either way, some versions omit choices a service provider doesn’t want its user to select. Some versions add provisions a service provider insists its user include. Many have customizations—beyond names and identifying information—that relate to the service provider’s business. You might be surprised by some of the plan provisions a service provider seeks to influence. To be confident that what you hope to accomplish is feasible, you’d need to look into the exact details. Or if you or your client has any doubt, might it be simpler to start over? Whatever someone might assert about lacking reliance on an IRS opinion letter when a user no longer gets a service from that document’s sponsor or licensee, one doubts another provider’s service agreement would preclude your client from relying on an IRS opinion letter issued to you (or the publisher you license from) when your client adopts a plan-documents version you licensed. Nothing I post here is tax or legal advice. TPApril, you should ask your firm’s lawyer.

I’ve seen practitioners arrange a transfer as of midnight between December 31 and January 1, with the receiving plan’s administrator and its professionals finding that beginning that plan’s Form 5500 reporting with January 1 is good-enough reporting. I’ve also seen transactions in which everything happened within December, and others for which everything happened on January 1 or 2. I’ve never needed to consider which choice of transaction date or what reporting is correct. Other BenefitsLink neighbors can explain the reporting. As with any transaction, a decision-maker shouldn’t conclude anything until one has collaborated advice from one’s lawyers, actuaries, accountants, and other professionals.

At least from the individual-account plan, and perhaps from the defined-benefit plan too, the partners might consider a spin-off in which a new plan for Joe’s new firm accepts a symmetry of assets and obligations allocable to Joe and those who follow Joe into Joe’s firm. The partners ought not do a spin-off until Mary, with her lawyer’s and her actuary’s advice, and Joe, with his lawyer’s and his actuary’s advice, each finds that the split is fair. If the partners agree on a spin-off, might they prefer transfers-out with December’s year-close and transfers-in with January’s beginning?

BenefitsLink neighbors, please help me consider how to administer, and later amend, a plan to follow § 401(k)(2)(D)/401(k)(15). (Let’s assume the proposed rule becomes the final rule.) Before 2024 (and before 2019), the plan makes an employee eligible (unless a specified exclusion applies) if she is age 21. There is no service condition. An employee enters with the first pay period that begins with or after the date she met the eligibility conditions. So, a new employee enters the plan on her first day of employment. The eligibility conditions are the same for each of elective contributions, matching contributions, and nonelective contributions. If it matters, the plan uses no nondiscrimination safe harbor. The plan is one of a few dozen different plans that are counted together in one § 414(b)-(c)-(m)-(n)-(o) group. The plan is not, and has no risk of becoming, top-heavy. Before 2024, the plan excludes an employee the employer classifies as an intern (even if that employee is not an intern for some purpose other than the retirement plan). The employer classifies as an intern anyone who lacks a baccalaureate degree. An intern works in a summer, between semesters. The proposed rule sets up some consequences for an eligibility condition that “has the effect of imposing an age or service requirement with the employer or employers maintaining the plan.” No general statement in the proposed rule explains or describes how one would discern that a condition “has the effect of imposing an age or service requirement[.]” Beginning with 2024, the plan’s administrator intends to administer the plan according to what the administrator anticipates the later amended and restated plan will retroactively provide. If an intern is invited for a third consecutive summer, she will have completed two consecutive 12-month periods during each of which she was credited with 500 hours of service. [29 C.F.R. § 2530.200b-3(c)-(e) https://www.ecfr.gov/current/title-29/part-2530/section-2530.200b-3#p-2530.200b-3(c)] If such an intern has reached age 21 (and no exclusion applies), meeting § 401(k)(2)(D) would make the intern eligible for elective contributions. May the plan’s administrator exclude an intern under the plan’s intern exclusion? This would mean finding the intern exclusion is not a proxy for an age or service condition. Or should the plan’s administrator reason that the intern exclusion “has the effect of imposing an age or service requirement” and treat a three-peat intern as eligible for elective contributions? If the plan sponsor now amends the plan to make every intern—even those who don’t meet § 401(k)(2)(D) conditions—eligible for elective contributions (but not for matching contributions, nor for nonelective contributions), would any unwelcome consequence result? (Assume neither the plan sponsor nor the employer worries about how this change would affect an average-deferral-percentage test.)

What does the partnership agreement provide about how the partnership’s funding of the cash-balance pension plan is allocated among the partners? Even when public law governs the partnership’s funding obligation to the pension plan, the private law of the partnership agreement might govern the allocations of those and other expenses among a partnership’s partners. A partner might want her lawyer or her certified public accountant (or, perhaps better, their collaborative work) to check the partnership’s accountings and allocations of expenses against the partner’s and her professionals’ independent reading of the partnership agreement. And if those professionals are not pension experts, they might bring in an actuary’s or a lawyer’s work to discern how much of the partnership’s funding obligation is incremental because of a particular partner’s or other individual’s benefit, which might, in turn, help discern how much is allocable to the partner under her partnership agreement.

If the plan’s governing documents provide that forfeitures are used first for plan-administration expenses, the plan’s fiduciaries might consider paying outstanding expenses, reimbursing the employer for its recent payments of expenses it was not obligated to pay, and prepaying prudently anticipated plan-administration expenses. With a plan’s discontinuance and termination, it can be wise (especially if the employer too is or soon will become defunct) to see to it that service providers—lawyers, accountants, recordkeepers, third-party administrators (!)—are paid before the plan’s final distributions to participants and beneficiaries. I’ve advised on situations in which a plan’s administrator didn’t think to prepay or reserve for final plan-administration expenses. That can result in unpleasant consequences for former executives of the defunct employer. In some situations, the Labor department asserts that a human who was the plan’s fiduciary is personally liable to pay for needed services, including those needed to prepare the final Form 5500 report with an independent qualified public accountant’s audit of the plan’s financial statements.

Is there a tax law difference between treating a contribution as "incurred" to take a deduction and treating a contribution as "incurred" to take a credit? Should these be treated the same? Or differently?

Is this restatement cycle an opportunity to get a little IRS guidance on some unsettled SECURE 2019 and SECURE 2022 ambiguities? Could a maker of preapproved documents express in its documents some provisions and choices that express a desired interpretation? If the IRS reviewers don’t say no to something expressed in the documents and flagged in one’s application, that’s tantamount to a soft guidance. Or if the IRS reviewers resist, that gives us at least a preliminary look into the issues.

For austin3515’s questions, does it matter whether the employer’s Federal, State, and local income tax returns had been and are made on the cash-receipts-and-disbursements method of accounting? To the extent that “incurred” matters, which facts might establish that a discretionary contribution regarding a year was incurred within that year?

Until the Treasury department’s or its Internal Revenue Service’s guidance: Consider Internal Revenue Code of 1986 (26 U.S.C.) § 7701(a)(25): When used in this title, where not otherwise distinctly expressed or manifestly incompatible with the intent thereof— The terms “paid or incurred” and “paid or accrued” shall be construed according to the method of accounting upon the basis of which the taxable income is computed under subtitle A. Consider I.R.C. § 446. Consider the regulations interpreting and implementing § 446. Consider logical consistency with I.R.C. § 404, and with the regulations interpreting and implementing § 404. To the extent that “incurred” is relevant, consider what incurred means under generally accepted accounting principles.

Informal poll: Of participants and beneficiaries in your clients’ plans, what portion get routine deliveries of disclosures by electronic means? _____% electronic means _____% still get paper. And how many of your clients’ plans charge an individual’s account for getting paper statements and other disclosures? _____% charge an individual’s account an incremental amount for getting paper.

Also, a distribution’s gross-up need not be restricted to amounts withheld toward taxes but might, even for a hardship distribution, include someone’s reckoning of “amounts necessary [for the distributee] to pay any federal, state, or local income taxes or penalties reasonably anticipated to result from the distribution[.]” 26 C.F.R. § 1.401(k)-1(d)(3)(iii)(A). I’ve seen a plan’s administrator approve a hardship distribution for 200% of the need amount. For some New York City residents (with marginal income tax rates summing more than 50%), that’s still not enough to meet the taxes that result from a too-early distribution. A plan’s administrator and its service provider might assume they don’t know everything about the distributee’s and one’s spouse’s circumstances, and so approve a gross-up request within a plausible range.

The rule’s form [29 C.F.R. § 2520.104b-10(d)(3)] suggests a few clues: The instruction says the description should be “brief”. The form suggests that what follows “Your plan is a” might fit one sentence. The instruction directs that the description must include (i) whether the pension plan is a defined benefit plan or an individual-account plan, and (ii) whether the plan is a multiemployer plan, a single-employer plan, a pooled-employer plan, or a multiple-employer plan other than a pooled-employer plan. The instruction suggests the description should be logically consistent with the to-be-summarized report’s plan characteristic codes. The instruction does not say the description must include all information from all plan characteristic codes. (That’s good because one individual-account pension plan might have as many as 19 codes. Expressing all that information might be more than a “brief description” the Labor department envisioned.) Here’s one illustration (for a plan with a § 401(k) arrangement, but no nonelective or matching contribution): Your plan is a single-employer individual-account retirement plan that requires participant-directed investment. That sentence meets required elements, and adds an extra fact that can be logically consistent with a few plan characteristic codes. Or here’s another illustration: Your plan is a multiple-employer association retirement plan that provides an individual account for each participant or beneficiary. BenefitsLink neighbors might have many more ideas. And I would not be surprised if software logic and constraints result in a description that chops phrases and sentences, and omits information that’s not strictly necessary.

Imagine an employer has 200 nonexcludable employees, which means 50 employees is the lesser-of for Internal Revenue Code § 401(a)(26)(A). Is the fix a corrective amendment to cover a few more employees? See 26 C.F.R. § 1.401(a)(26)-7(c) https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)(26)-7#p-1.401(a)(26)-7(c).