Peter Gulia

If you continue with this client, make and keep records of the written advice you provide. Your descriptions of the client’s behavior suggest the client might assert it did not receive, or did not understand, your advice.

DMincevich, I imagine the hypothetical situation you describe has typical small-business facts under which the employer that sponsors a retirement plan also is the plan’s administrator. The employer might want its lawyers’ advice about the employer’s duties under the Immigration Control and Reform Act of 1986, other Federal laws regarding employment, States’ laws about employing workers and paying wages, and Federal, State, and municipal laws about reporting wages for tax and other purposes. In particular, the employer might want advice about whether it must or should file Form W-2c and W-3c corrected wage reports for wages paid in 2022 and earlier years, and Form 941-X returns for periods with incorrectly reported wages. The administrator might want its lawyers’ advice about the Employee Retirement Income Security Act of 1974, the Internal Revenue Code of 1986, and other Federal laws. That might include advice about how to correct carefully the plan’s records about a participant’s identity, and how to do it to not alter, discard, or conceal earlier records. That a worker was an alien an employer ought not to have employed does not defeat the worker’s rights as a participant under an ERISA-governed retirement plan.

The ten-year budget-reconciliation period for the Consolidated Appropriations Act, 2023, of which SECURE 2022 is a division, is fiscal years 2023-2032—that is, October 1, 2022 to September 30, 2032. The change to age 75 applies “[i]n the case of an individual who attains age 74 after December 31, 2032[.]” Internal Revenue Code § 401(a)(9)(C)(v)(II). Someone born in 1960 would reach age 74 in 2034, age 75 in 2035, and might have a required beginning date as soon as April 1, 2036. For someone born in 1960, an applicable age of 73 would result in a required beginning date no sooner than April 1, 2034 and a first distribution calendar year no sooner than the year ended December 31, 2033—1¼ years after the budget-reconciliation period ends. While I haven’t read the whole report, I imagine the revenue estimators could have assumed the change to an applicable age of 75 for those born in 1960 and later would bear no revenue loss in the budget-reconciliation period ending September 30, 2032. The Joint Committee on Taxation estimate scored the combination of both increases in applicable age for a required beginning date as a revenue loss of only about $7 billion for fiscal years 2023-2032. JCX-21-22 2022-12-22.pdf

Before turning to the questions you ask, an employer might want advice about how a more-generous election period relates to each insurance contract, whether health or stop-loss casualty, involved. For a stop-loss insurance contract regarding a group health plan that provides its benefit without health insurance (and instead by the employer’s self-funding), an election period more generous than public law requires might breach an obligation of the insured employer, breach a condition for the insurer’s obligation, or otherwise defeat what would be the insurer’s obligation regarding a continuee. Or for a group health insurance contract, an election period more generous than public law requires might breach an obligation of the employer as the group contract holder, breach a condition for the insurer’s obligation, or otherwise defeat what would be the insurer’s obligation regarding a continuee. With either of those contracts, an employer might want help from a reader who’s experienced or at least knowledgeable (and, preferably, with her own financial capacity to restore the employer's loss that results from its reliance on an adviser's incorrect or incomplete advice or information).

Thank you, Paul I. Your observations relate to why I ask my question. Because a cash-balance pension plan illustrates an accrual to look like an individual account, some participants—especially the many who never have been a participant under a defined-benefit plan that’s not a cash-balance plan—might imagine a plan must provide for some taker even if the participant has no surviving spouse. To them, a pension plan that provides nothing on an unmarried participant’s death before retirement could be a surprise. Except for a surviving spouse’s QPSA ERISA § 205 commands, does a cash-balance plan’s designer ever consider providing no death benefit in some circumstances? (If so, might that slightly lower the employer’s funding cost?) Or would not providing a death benefit be so contrary to the cash-balance idea that no one does it?

In a recent BenefitsLink discussion on how to handle a situation about an absence of a participant’s beneficiary designation, Calavera alluded to some possibility that a pension plan might, if there is no surviving spouse and no participant-designated beneficiary, provide no benefit distributable after the participant’s death. Even if it’s rare, has anyone seen a cash-balance pension plan with provisions like that?

And a plan’s administrator or claims administrator might evaluate whether someone should Read The Fabulous Document. Some documents impose a pension-like spouse’s-consent condition even when neither ERISA’s title I nor the Internal Revenue Code calls for it. While decades of improvements in service providers’ documents make such an unintended provision less likely than it once was, it is not yet so infrequent that it’s riskless for a plan’s administrator (or whoever really does the work) to omit reading the document. A risk evaluation might be affected by the size of a distribution, or of a set of distributions.

I have not read the subsection Internal Revenue Code § 414(v)(7)(A) refers to, and have not anything subsection 3121(a) refers to, directly or indirectly. Does “wages (as defined in section 3121(a))” include a person's self-employment income?

If the statute’s text were “wages” with no limiting or defining phrase, the Treasury department might interpret what the word “wages” means. But to interpret “wages (as defined in section 3121(a))” there ought to be somewhat less room for an intentionalist or purposivist interpretation.

Here’s another statute-reading exercise for BenefitsLink mavens. Internal Revenue Code § 414(v)(7)(A) restricts to Roth treatment a § 414(v)(1) catch-up deferral for “an eligible participant whose wages (as defined in section 3121(a)) for the preceding calendar year from the employer sponsoring the plan exceed $145,000[.]” If a retirement plan’s participant who otherwise would have had wages more than $145,000 had no wages (but as a partner had net earnings from self-employment more than $145,000), may she choose non-Roth catch-up deferrals?

EBECatty, thank you for your clear-minded reading. Yesterday, I was too dense to see it.

SECURE 2022 § 325 added only Internal Revenue Code § 402A(d)(5), quoted above. Here are links to Bloomberg’s edition of the Internal Revenue Code, with SECURE 2022 amendments: I.R.C. § 401 https://irc.bloombergtax.com/public/uscode/doc/irc/section_401; I.R.C. § 402A https://irc.bloombergtax.com/public/uscode/doc/irc/section_402a. I checked both these sections for references to “401(a)(9)(A)”, and founding nothing that undoes that minimum-distribution condition for Roth 401(k) participants. I checked both these sections for references to SECURE 2022’s § 325, and found nothing that undoes that minimum-distribution condition for Roth 401(k) participants. My searches in § 401 on “402A” and on “Roth” found nothing that undoes the § 401(a)(9)(A) minimum-distribution condition for Roth 401(k) participants. I want to be wrong, so I need not over the next ten years convert my Roth 401(k) amounts into Roth IRA amounts.

Like you, I believe someone intended the relief for all three kinds of employment-based eligible retirement plans. But I don't see any text in the statute that provides the nonapplication for a Roth 401(k) subaccount.

With a heading “Mandatory Distribution Rules Not to Apply Before Death”, Internal Revenue Code § 402A(d)(5), as SECURE 2022 adds it for tax years that begin on or after January 1, 2024 (with a transition for 2023 measures to be paid in 2024), provides: Notwithstanding sections 403(b)(10) and 457(d)(2), the following provisions shall not apply to any designated Roth account: (A) — Section 401(a)(9)(A). (B) — The incidental death benefit requirements of section 401(a). Am I reading correctly that only Roth 403(b) and Roth 457(b) participants are excused from minimum distribution before death? Or is there another provision I didn’t read thoroughly enough to find?

Below Ground, thank you for a most compelling reason to leave the plans distinct.

C.B. Zeller and Paul I, thank you for your thoughtful good help. Beyond simply crediting contributions when the recordkeeper receives them, is there another reason for the employer to worry that different payroll schedules confuses the recordkeeper?

If there is a plan year that began or begins after December 29, 2022. But perhaps SECURE 2022 § 348 doesn’t affect a plan year that began August 1, 2022.

Do BenefitsLink mavens concur that changing a required beginning date to something later than age 70½ would have been an optional change, and if not done in the plan’s actual administration needs no amendment to tax-qualify the plan for its termination?

An employer maintains two § 401(a)-(k) plans, one for manufacturing employees, who are union-represented, and another for office employees, none of whom is union-represented. The employer is considering merging the two plans into one. The plan for office employees uses a safe-harbor matching contribution to meet rules about coverage, nondiscrimination, and top-heavy. Even after the plans’ merger, there would be no risk, even with substantial growth in both headcounts, that the merged plan’s participant count would reach a number that calls for engaging an independent qualified public accountant. The employer is not worried about a tax-qualification defect for either plan. Are there other reasons for not merging the plans? Are there other reasons to prefer the hygiene of separate plans?

Do we concur that someone in the circumstances SadieJane describes should give one’s client correct information, then let the client decide what it will do? Or is there anything else a practitioner ought to do?

Consider what exactly the plan needs for the plan-termination amendment. Beyond ending accruals and providing for the final distributions, an amendment for a plan’s termination might need no more than to state: · a provision the Internal Revenue Code requires as a condition of tax-qualified treatment; and · an optional provision presumed in the plan’s actual administration. I don’t remember a SECURE 2019 change the Internal Revenue Code requires as a condition of a cash-balance defined-benefit pension plan’s tax-qualified treatment. About optional provisions, one might not need an amendment if the plan was not changed. For example, if the sponsor could have changed the plan’s normal retirement age, early retirement age, or required beginning date but did not, there might be no need to write an amendment for a provision that never was adopted.

Or could the defined-benefit pension plan provide participant loans available to all participants?

If one follows the Labor department’s rule, an ERISA-governed group health plan’s summary plan description includes a description or explanation about part 6 continuation coverage. 29 C.F.R. § 2520.102-3(o) (Contents of summary plan description) https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-C/part-2520/subpart-B/section-2520.102-3#p-2520.102-3(o). For two elements of information (a provider network, a claims procedure), the rule allows a plan’s administrator to furnish something as a document separate from the rest of the summary plan description if the SPD “contains a general description of the provider network [or claims procedure] and . . . the SPD contains a statement that [the other document is] furnished automatically, without charge, as a separate document.” The rule specifies how to use a separate document for those two elements, and has no similar or parallel mention for any other element of information, including those the SPD-contents rule specifically commands. That might suggest to some readers that the Secretary of Labor might not have meant to enable using a separate document for the required explanation about continuation coverage. Yet, some plans’ administrators use widely a range of methods, with widely varying ways of seeking to integrate several separate documents as “the” summary plan description. Another method I’ve seen some plans’ administrators use is to download the word-processing text of the Labor department’s “model general notice” (or the COBRA service provider’s adaptation of it) and edit that text to serve as a summary plan description’s explanation. https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra#employers Belgarath, please recognize this is an observation about what others do, and none of it is my advice. About a governmental plan, those involved might resolve the questions in different ways.

Internal Revenue Code of 1986 § 457(f) is a rule about when compensation counts in income. “In the case of a plan of an eligible employer providing for a deferral of compensation, if such plan is not an eligible deferred compensation plan, then— the compensation shall be included in the gross income of the participant or beneficiary for the 1st taxable year in which there is no substantial risk of forfeiture of the rights to such compensation[.]” I.R.C. (26 U.S.C.) § 457(f)(1)(A). What people call a § 457(f) plan is one the parties hope maintains a substantial risk of forfeiture until the compensation is paid (or at least until it would be payable if the participant or beneficiary claims it). If you’re designing a plan, reading 457 Answer Book’s chapter 11 could help you consider which restrictions might be enough to support a substantial risk of forfeiture. If you’re applying a written plan, it’s RTFD—Read the Fabulous Document. Many participants prefer that a right not happen too quickly, because whatever a participant has a right to take generally counts in income.

Internal Revenue Code § 414A(c)(4)(B) provides: “Subsection (a) [treating an arrangement as not a § 401(k) arrangement unless it meets § 414A(b) automatic-enrollment conditions] shall not apply to any qualified cash or deferred arrangement, or any annuity contract purchased under a plan, earlier than the date that is 1 year after the close of the first taxable year with respect to which the employer maintaining the plan normally employed more than 10 employees.” A traditional canon of text interpretation is that every word ought to have some effect. Perhaps “normally” means something for your question. On your example, did the employer normally employ a number of employees somewhere between eight and seven? Or at least normally no more than eight?