Peter Gulia

Scrambled Eggs Super! https://seuss.fandom.com/wiki/Peter_T._Hooper Sometimes we might regret that the IRS’s inflation-adjustment notices do not show the Consumer Price Index measures used, and do not show the arithmetic.

If the plan (including loan policy or procedure made under the plan) imposes no restriction or condition beyond those needed to meet tax law: Internal Revenue Code § 72(p)(2)(B)(ii): “Clause (i) [limiting a loan’s term to five years] shall not apply to any loan used to acquire any dwelling unit which within a reasonable time is to be used (determined at the time the loan is made) as the principal residence of the participant.” Many plans’ administrators’ process claims for a participant loan accepting the claimant’s statements, made under penalties of perjury, on a paper or electronic claim form. A claim form often had been designed to paraphrase text from the statute, regulations, or both. This is not advice to anyone.

And Lethal Weapon.

Thank you for the pop-culture reference to Better Off Dead.

The bonus plan you described is somewhat similar to many banks’ and securities broker-dealers’ bonus plans. You didn’t mention restricted stock, and your employment condition might be shorter than some others. (About who invented what, I won’t comment on Wall Streeters’ designs of these arrangements. Smith Barney, now absorbed into Morgan Stanley, was a Citigroup subsidiary during my inside-counsel work for them.) At least one court found that what some securities broker-dealers consider a usual bonus plan is an ERISA-governed pension plan. Shafer v. Morgan Stanley, No. 20-cv-11047-PGG, 2023 WL 8100717 (S.D.N.Y. Nov. 21, 2023), writ denied and appeal dismissed, 2025 WL 1890535 (2d Cir. July 9, 2025); Shafer v. Morgan Stanley, No. 20-cv-11047-PGG, 2024 WL 4697235 (S.D.N.Y. Nov. 5, 2024). See also Tolbert v. RBC Capital Markets Corp., 758 F.3d 619 (5th Cir. 2014); Paul v. RBC Capital Markets LLC, 2018 WL 784577 (W.D. Wash. Feb. 8, 2018). There are also court decisions that interpret the law and facts differently. An employer might want its lawyers’, including an ERISA lawyer’s, advice on all compensation arrangements. And about governing-law and exclusive-forum clauses in all arrangements, including bonus plans.

It’s not fully accurate to say no compensation is deferred. What is or isn’t a deferral for one or more purposes of Internal Revenue Code § 61, § 83, § 409A, or § 451 does not necessarily control what might be “a deferral of income” within the meaning of ERISA § 3(2)(A). Some might look to tax law to put meaning on a word or phrase in ERISA’s title I, but some might not. Considering your hypothetical example, some might say there was a deferral for only one month—from when the bonus became no longer conditional to when it’s payable or paid. But others might say the bonus was substantially earned based on the work done in 2025, and then is deferred, subject to a condition, until about three years later. Also, might an employee leave her job promptly on collecting a bonus payment? Could that result a deferral, however short, “extending to the termination of covered employment[.]” Until one reads the available court decisions and thinks through the modes of analysis, a prediction about what a court generally, a particular court, or a particular judge would decide might be grounded on little more than instinct. (It’s even harder to predict what an arbitrator might do.) I don’t say anything about what’s a right or wrong interpretation or application of the statute. Rather, I say only that courts (and arbitrators) might differ in how one interprets the statute, or might differ in how one applies an understanding of the statute to a particular set of facts, or both. If I were dealing with a real client, I’d uncover the facts (including some beyond what my client thinks is relevant), do the legal research, and say what I think. And I wouldn’t be afraid to state a conclusion. I might feel that law ought not to treat a bonus plan as a pension plan. But I wouldn’t let my view about what law ought to be cloud my professional responsibility to provide careful advice. This is not advice to anyone.

The counterparties’ dispute is about whether a plan “(i) provides retirement income to employees, or (ii) results in a deferral of income by employees for periods extending to the termination of covered employment or beyond[.]” ERISA § 3(2)(A). If what Morgan Stanley Smith Barney calls a bonus plan is such an ERISA-defined pension plan and the plan is not sufficiently limited to a “select group”, the plan is governed by ERISA’s funding and vesting provisions. Here’s the Bakers’ posting of a complaint that asks the Federal court for the Southern District of New York to vacate the advisory opinion as contrary to law and contrary to the Labor department’s procedure. https://benefitslink.com/src/ctop/sheresky-v-chaves-deremer-sdny-complaint-10282025.pdf That court previously found that the Morgan Stanley Smith Barney plan is ERISA-governed. Even if no court vacates EBSA’s advisory opinion, no court or arbitrator need follow it, and some might not be persuaded by EBSA’s interpretation or reasoning.

Considering § 414(v)(2)’s subparagraphs (B), (C), and (E), there are multiple possible interpretations about how the several expressions interact or don’t. https://www.taxnotes.com/research/federal/usc26/414?highlight=414 With three, four, or more possible reasonings, one could defend $11,250 or $12,000. Many of us are reluctant to advise a client to use or communicate an amount other than the one the IRS eventually will publish. If the current Antideficiency Act shutdown ends soon, we might get the IRS’s prepublication release before Thanksgiving Day.

Brian Gilmore, thank you for your continuing generosity in teaching health plans and cafeteria plans to the many of us who don’t work in those fields. Now that Internal Revenue Code § 125 is a 47-year-old, some might wish the Treasury department would do more than proposed interpretations. (You’re right to remind us that some IRS people might act following proposed rules as if they were rules.) Like Belgarath, I don’t work with cafeteria plans. And it’s inconvenient to look up something that, because it’s only proposed, does not appear in the Code of Federal Regulations. The -7(b)(1) text you quote describes a situation in which a cafeteria plan does not discriminate in favor of highly-compensated individuals. But the sentence does not say meeting its conditions is the only way to not discriminate. Is there more text in the proposed rule that describes when a plan does discriminate in favor of highly-compensated individuals? I seek to learn not to become a cafeteria-plans expert but rather so I or a practitioner I advise doesn’t miss a step in designing or administering a retirement plan. For retirement plans, there are situations for which no one states in a plan’s governing documents or otherwise elects a top-paid-group election because that election is unneeded for the plan one designs or administers. If one interprets § 125 to look to § 414(q) to find who’s a highly-compensated individual, the § 414(q) rule suggests that an employer might prefer that its retirement plan state an otherwise unneeded top-paid-group election to remove a doubt about whether “[t]he elections . . . [are] provided for in all plans of the employer and [are] uniform and consistent with respect to all situations in which the section 414(q) definition is applicable to the employer.” 26 C.F.R. § 1.414(q)-1(b)(2)(iii). If a plan intended as a cafeteria plan might fail to meet a condition for § 125 tax treatment because of a lack of nonhighly-compensated individuals, that’s a point a retirement-plans practitioner might want to be aware of. This is a little more than an abstract curiosity. There are some employers for which every employee has compensation no less than $160,000. Brian Gilmore, we’d welcome more of your generous teaching.

But if an employer has not made a top-paid group election for any employee-benefit plan and all employees are classified as “highly compensated” within the meaning of Internal Revenue Code § 125(e)(1)(C), does this mean a § 125 plan does not discriminate “in favor of” highly-compensated participants or individuals because there are none other?

Paul I, thank you for this. For BenefitsLink readers, here’s the Bakers’ post of the complaint: https://benefitslink.com/src/ctop/arechiga-v-ibm-sdny-complaint-10312025.pdf A method I suggest for some (not all) situations is a composite of indexes, but it: sets the weights not according to allocations of a fund’s current investments but on the fund’s previous legally effective declaration of the fund’s asset-allocation targets; and affirmatively discloses every index (each widely recognized and used) and the weight of its asset-allocation category in the composite. A plan’s fiduciary should get its lawyer’s advice, and should get advice from one or more investment advisers that are independent regarding the investment choices to be evaluated. (A small plan’s fiduciary might omit one or both aspects of advice if the expense would be disproportionate to the incremental advantage that could be obtained through better informed decision-making.) This is not advice to anyone.

The Internal Revenue Service has neither published nor released inflation-adjusted amounts for retirement plans for 2026. Based on recent political news suggesting a potential end to the current application of the Antideficiency Act, some hope the IRS release (not the publication in the Internal Revenue Bulletin) happens by November’s end. Consultants that have published unofficial calculations concur that a participant is a § 414(v)(7)-affected individual for 2026 if her 2025 Social Security wages were more than $150,000.

First, consider what provisions the documents governing the plan state. RTFD, Read The Fabulous Documents. But next, consider that a plan’s administrator often interprets a plan’s documents to anticipate provisions that might become retroactively applicable by a remedial amendment. RTFD, Read The Future Documents. Further, some plans’ administrators interpret the current documents, the anticipated documents, or both not strictly for what either text states but rather for what makes sense to fit with the Internal Revenue Code and sensible interpretations of it, including the Treasury department’s legislative and interpretive rules (to the extent a rule is not contrary to law). Yet, one should not discern a plan’s provision by looking only to the tax Code and regulations. A required beginning date and a minimum distribution can vary not only with: whether the plan mandates a distribution sooner than a § 401(a)(9) required beginning date. whether the plan allows or precludes periodic payments; whether the distribution is (or is not) an annuity, or life-expectancy payments; whether the beneficiary is the participant’s surviving spouse or someone else; whether the beneficiary is an eligible designated beneficiary; but also with which optional provisions the plan states or omits (or is deemed to state or omit); and which elections the plan permits or precludes. 26 C.F.R. § 1.401(a)(9)-3(c) https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)(9)-3#p-1.401(a)(9)-3(c). Remember, that a plan could state a provision without tax-disqualifying the plan does not by itself mean that the plan does have that provision. This is not advice to anyone.

The Joint Committee on Taxation’s “bluebook” explanation of 2021-2022 Acts suggests JCT’s assumption that Congress intended the inflation-adjusted amount for a 60-63 participant is 150% of the inflation-adjusted amount for an age 50 participant. See page 332 (the last two sentences of the “explanation of provision”) and footnote 1505. I attach a pdf of pages 331-332. Joint Committee on Taxation, General Explanation of Tax Legislation Enacted in the 117th Congress [JCS–1–23] (Dec. 2023), available at https://www.jct.gov/publications/2023/jcs-1-23/. The explanation cites no document or other source as support for an assumption Congress intended something other than the statute’s text. A textualist interpreter might say Congress cannot have an intent other than the enacted text. It’s unclear whether the IRS will indulge or refuse JCT’s assumption, or find another way to interpret the statute’s text. JCT explanation of age 60-63 catch-up.pdf

For an age 60-63 catch-up, is 2026’s inflation adjusted amount $12,000 or $11,250? On the day the Bureau of Labor Statistics released September’s Consumer Price Index measures: John Feldt said $12,000. https://benefitslink.com/boards/topic/80106-2026-cola-projection-of-dollar-limits/#comment-354029 Mercer said $12,000. https://www.mercer.com/insights/law-and-policy/mercer-projects-2026-retirement-plan-limits/ But Milliman said $11,250. https://www.milliman.com/en/insight/2026-irs-limits-forecast-final-estimates Can smart BenefitsLink people resolve which is correct? Here’s the adjustment rule [I.R.C. § 414(v)(2)(E)(i)]: (E) Adjusted dollar amount. For purposes of subparagraph (B), the adjusted dollar amount is — (i) in the case of clause (i) of subparagraph (B), the greater of — (I) $10,000, or [and] (II) an amount equal to 150 percent of the dollar amount which would be in effect under such clause for 2024 for eligible participants not described in the parenthetical in such clause[.]

Consider also whether a § 403(b) plan that includes a § 414A automatic-contribution arrangement must provide a QJSA/QPSA regime or alternate ERISA § 205 rights for a participant’s spouse.

Here’s the EBSA interpretation Paul I mentions; see Q&A-14 [page 10]: https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2012-02r.pdf.

Beyond law, listen, carefully, to Paul I’s observations about civility and practical sense. And about an ethics code that results from membership in a voluntary association, here’s one bit: “. . . . The Actuary shall not refuse to consult or cooperate with the prospective new or additional actuary based upon unresolved compensation issues with the Principal unless such refusal is in accordance with a pre-existing agreement with the Principal. . . . .” American Academy of Actuaries, Code of Professional Conduct, Precept 10, Annotation 10-5 https://actuary.org/wp-content/uploads/2014/01/code_of_conduct.8_1.pdf.

Consider that whether a person is a fiduciary because the person might have provided investment advice is a mixed question of law and fact a court decides. A court need not consider any Labor or Treasury department interpretation of the statute. Yet, a court may consider any source, governmental or secondary. A court may consider anything an agency published, including a rule or other interpretation no longer in effect. A court must not defer to any agency interpretation; rather, the court interprets the statute.

If the plan provides participant-directed investment for all participants: Why does the plan sponsor not want brokerage accounts available, as a participant-directed choice, for all participants?

Your description of the facts suggests you might lack a written engagement with a pension plan’s sponsor or administrator, and further might lack a written engagement with the plans’ service provider. Recognizing those and other complexities, lawyer-up. About those of the pension plans that are ERISA-governed, consider Standards of performance of actuarial services, 20 C.F.R. § 901.20 https://www.ecfr.gov/current/title-20/section-901.20. Get your lawyer’s advice about whether the State law that applies to each engagement provides your retaining lien on (i) your certificates and reports not yet paid for, and (ii) those of a client’s records in your possession. If State law provides you some retaining lien, consider the extent to which Federal law supersedes State law, restraining your rights by a duty to return a client’s records. For example, 20 C.F.R. § 901.20(j)(1). Consider distinctions between a client’s records and the actuary’s work product. This is not advice to anyone. BenefitsLink neighbors, what do you think about withdrawing a Schedule SB because it was not paid for?

While tax law might not set a restraint on the number of distributions, a plan’s provisions or a service agreement might. Among other potential restraints, consider whether a service agreement provides a fee on each distribution processed, and whether the plan’s administrator charges the fee against the distributee’s account.

Unlike some recent years’ tax laws for which CCH/Wolters Kluwer decided against publishing a “Law, Explanation & Analysis” book, they published this on the “One Big Beautiful Bill Act”. In it, I see nothing about a remedial-amendment grace. A “written plan” for an employer’s dependent care assistance program might have expressed a limit not as a dollar amount but rather by reference to Internal Revenue Code § 129(a)(2)(A). If so, there might be no need to edit the written plan. But if some change is needed, how long does it take? Two-tenths of an hour? (One to write the amendment or edit the restatement, and another one-tenth to email it to the client.) If a service provider does § 129 plan documents for dozens, hundreds, or thousands of clients, might one use software to send the change quickly? Further, some employers treat a written explanation given to employees as also the “written plan” § 129 calls for. If an employer’s plan will provide or allow $7,500 for 2026, the employer will want to tell its employees that good news. Some communicated this in open-enrollment materials.

Consider that written plan’s provision might govern the plan, even if the provision is not needed for the plan to meet conditions for § 403(b)’s tax treatment. And if a plan is stated using an IRS-preapproved document, a user might have adopted a provision that a plan’s sponsor might otherwise not have intended. If the written plan does not state a “once in, always in” or other restraint against a change, a plan sponsor might consider whether a change would fit with a more-likely-than-not or substantial-authority interpretation of relevant tax law. Or, many plan sponsors might follow the Treasury’s interpretation [hyperlinks below], even if one considers it unpersuasive. 26 C.F.R. § 1.403(b)-5(b)(4)(iii)(B) https://www.ecfr.gov/current/title-26/part-1/section-1.403(b)-5#p-1.403(b)-5(b)(4)(iii)(B); Relief from the Once-In Always-In Condition for Excluding Part-Time Employees from Making Elective Deferrals under a § 403(b) Plan, Notice 2018–95, 2018-52 I.R.B. 1058 (Dec. 24, 2018) https://www.irs.gov/pub/irs-irbs/irb18-52.pdf. I say nothing about what is a correct or incorrect, or persuasive or unpersuasive, interpretation of the Internal Revenue Code. This is not advice to anyone.

I have not seen a situation like the one Lou S. describes. But that’s because plans I work with use a recordkeeper’s nondiscretionary computer-based procedure to approve or deny a claim for a participant loan. A participant’s request either is in good order with the rules the plan’s administrator instructed the recordkeeper to apply, or is NIGO and denied. There would be no human discretion, and the computer would lack information about a future leave. (The loan-application form has the claimant state every fact and every promise needed to follow the plan’s loan provision and procedure, and state everything under penalties of perjury.) If I were the human deciding for a plan’s administrator (and assuming I had caused the plan’s sponsor to revise the plan’s governing documents and written procedures to my satisfaction before I hypothetically consented to serve), I would not deny an otherwise sufficient claim for a participant loan merely because the participant will soon be on an approved leave if the administrator lacks knowledge that (i) the participant does not intend to repay the loan, or (ii) the participant won’t return to work soon enough, or her pay won’t be enough, to reamortize and repay the loan as the I.R.C. § 72(p) rule calls for. I recognize that claims procedures I’m used to can take on extra difficulties when a plan’s administrator (often impractical to separate from the employer) has too much information about the participant. This is not advice to anyone.