Artie M

I think you need to be more specific on what type of correspondence you are referring to. If it is a document that relates to a filing the ERISA statutory retention period is 6 years (though we normally advise 8 years). If it is a document that relates to determining participant's benefit which is due or may become due, there is no set period (we recommend holding it until at least 3 years after final distribution). One big warning...do not rely on prior record keepers to retain your documents.

Though the listed authorities usually come out with estimates prior to the IRS formal release and their estimates are usually on point, they all still state they are estimates. Not sure when the IRS guidance will come out due to the government shutdown

I am not sure we have enough facts to answer your question. Is this person still working at the law firm in 2025--presumably so or there doesn't seem to be an issue. Are you asking whether the switch from partner status in one year to non-partner status the following year affects or doesn't affect the start of their RMDs? I mean for retirement plan purposes, a self-employed individual (i.e., a person who has earned income for a tax year) is treated as an employee. See 401(c)(1). Also, no 5% issue. If they are still working at the law firm in 2025 with no ownership then I take that to mean they are providing services as a non-partner (a person could be a non-equity partner, i.e., no ownership, and still be a treated as a self-employed partner if they receive a share of the firm's income). A question then is whether they are providing services as an employee or as an independent contractor. Another is whether the plan has a definition of "retires" with regard to partners. Assuming they haven't retired for purposes of this query, if they are providing services to the law firm as an employee, seems like they would not be required to take a distribution simply because they have not retired (also assumes that the plan uses both the "age 73" and the "later of" rule). Otherwise, if they are providing services as an independent contractor (or not providing services at all) then it seems they would be required to take a distribution by 4/1/2026. Sorry if I am being dense or reading more into this than is necessary (overly anal)...

This can be done. Your company should put all the language it can in the service agreement stating the limits of its activities with regard to an ERISA plan and must ensure that it doesn’t do anything that goes past those limits. The service agreement, at a minimum, should state that the company does not provide specific investment recommendations to a plan on a regular, defined basis under a written agreement for compensation. The service agreement should explicitly state the company is not acting as an investment advisor and is not providing investment recommendations. It should state that it only provides factual information or administrative services. The company should carefully document its activities to show a lack of discretionary investment advice. The company should merely provide “access” to investments. It shouldn’t state something like this is the standardized slate we offer to plans…. They should likely frame this more as here is a slate of investments that we have seen ERISA plans utilize… it makes no recommendations regarding the appropriateness of an investment for an ERISA plan… tell the client to consult their own financial and investment advisors as to whether any investment is a prudent and proper investment for their plan…. All investment decisions, whether they are obtained through your company’s service agreement or through another provider, are the decisions of the plan sponsor. Nothing in your communications should even allude to or be able to be interpreted that any determination has been made by your company as to whether the offered investments are appropriate for any ERISA plan (just relay the fact that ERISA plans utilize them). The company can provide facts concerning the investments, prospectuses etc. This means it can provide educational materials about investment options in general and concepts but it cannot communicate anything that even appears to be recommending particular funds. Not advice, stream of thoughts here...

Parroting the Regulation example quoted above (changes to Reg language are bracketed and italicized), using your facts: "Because Participant['s] FICA wages from Employer[] for calendar year 202[5] exceeded [$145,000], Participant[] is subject to the requirements of section 414(v)(7)(A) for 202[6], and any catch-up contributions that Participant[] makes under the plan during 202[6] (which includes the [latter portion] of the plan year beginning [May 1, 2025]) must be designated Roth contributions." So, if your participant has catch up contributions in 2026, which you are saying they will (assuming they contribute to the plan after March 1, 2026).... Just substituting your facts in the language from the example in the Regulation.

Given what has been stated, the plan does not explicitly prohibit a loan to a participant on or going on leave. Since it is silent, it seems the plan could permit a loan to this participant. There is no prohibition in the Code for a loan being given to a participant on or going on leave. To me this would fall under the plan administrator's right to interpret the terms of the plan. As long at the loan provisions (e.g., suspension of payments, reamortization, and deemed distribution, if necessary) are administered properly, I don't see a qualification failure if the loan is provided. Once concern though is that your post states that the Plan Sponsor wants to work with this participant and permit the loan. Presumably this type of situation has never come up before (if it has, it should be treated like it was in the past). However, if the loan is approved and this situation comes up again, the loan should be made to the next participant who requests a loan when they are going on or are on leave (regardless of the Plan Sponsor's desires) as loans must be available to all participants and beneficiaries on a reasonably equivalent basis and the loans must be administered according to a uniform loan program.

While researching something else I saw this today. This may not be directly on point because of the structure of the transactions under the facts of PLR 9836028 but note the precise use of the terms seller and purchaser and the one way nature of the interpretation by the IRS in this excerpt from the PLR. Section 1.401(k)-1(d)(4)(i) of the Regulations provides that (i) the seller must maintain the plan. A distribution may be made under section 401(k)(10) and paragraph (d)(1)(iv) or (v) of this section only from a plan that the seller continues to maintain after the disposition. This requirement is satisfied if and only if the purchaser does not maintain the plan after the disposition. A purchaser maintains the plan of the seller if it adopts the plan or otherwise becomes an employer whose employees accrue benefits under the plan. A purchaser also maintains the plan if the plan is merged or consolidated with, or any assets or liabilities are transferred from the plan to a plan maintained by the purchaser in a transaction subject to section 414(l). A purchaser is not treated as maintaining the plan merely because a plan that it maintains accepts elective transfers described in sections 1.411(d)-4, Q&A-3(b)(1), or rollover contributions of amounts distributed by the plan (including distributions that the recipient elects, under section 401(a)(31), to have paid in a direct rollover to the plan of the purchaser).

You may want to check with the author of the plan document for clarification. Plus the answer may depend on if this is an EACA, QACA, etc. For instance, Treas. Reg § 1.401(k)-3(j)(2)(iv) regarding QACAs states: (iv) Treatment of periods without default contributions. The minimum percentages described in paragraph (j)(2)(ii) of this section are based on the date the initial period begins, regardless of whether the employee is eligible to make elective contributions under the plan after that date. However, for purposes of determining the date the initial period described in paragraph (j)(2)(ii)(A) of this section begins, a plan is permitted to treat an employee who for an entire plan year did not have contributions made pursuant to a default election under the qualified automatic contribution arrangement as if the employee had not had such contributions made for any prior plan year as well. Here, the plan is permitted to provide for something... but it doesn't have to....

Treas. Reg. §1.414(v)-2(d)(3) Example (3). Application of section 414(v)(7)(B) to a plan with a plan year other than the calendar year. (i) Facts. Participant B participates in an applicable employer plan sponsored by Employer E. The plan year begins on July 1 and ends on June 30. Participant B had $160,000 in wages within the meaning of section 3121(a) from Employer E for calendar year 2026, and is a catch-up eligible participant for calendar year 2027. For the plan year beginning July 1, 2026, the plan allows all catch-up eligible participants to make catch-up contributions and requires that any elective deferrals in excess of an applicable limit made by catch-up eligible participants who are subject to the requirements of section 414(v)(7)(A) be designated Roth contributions. (ii) Analysis. Because Participant B's FICA wages from Employer E for calendar year 2026 exceeded $155,000, Participant B is subject to the requirements of section 414(v)(7)(A) for 2027, and any catch-up contributions that Participant B makes under the plan during 2027 (which includes the second half of the plan year beginning July 1, 2026) must be designated Roth contributions. Because Participant B is permitted to make catch-up contributions that are designated Roth contributions under the plan for the plan year beginning July 1, 2026 (after Participant B reaches an applicable limit (as defined in § 1.414(v)-1(b)(1)), all catch-up eligible participants under the plan must be permitted to make catch-up contributions that are designated Roth contributions for the plan year. Furthermore, if the plan continues to permit catch-up contributions for the plan year beginning July 1, 2027, then any catch-up contributions that Participant B makes under the plan during the first half of that plan year must be designated Roth contributions (as well as any catch-up contributions in the second half of the plan year if Participant B had wages exceeding the applicable threshold in 2027). Only authority I know of that is "directly" on point regarding your question.

quickly consulted Mr. Google... no formal authority but IRS website (https://www.irs.gov/retirement-plans/retirement-plans-faqs-on-designated-roth-accounts) says this:

I would look this up... my understanding is that a deemed distribution from a defaulted loan cannot be a qualified distribution even if the 5-year rule is met. Also, if less than 59 1/2 10% penalty.

Agree with above....A distribution can only be taken if their employment has been terminated due to a permanent layoff, not a temporary layoff with a reasonable expectation of being called back to employment.

I haven’t looked at this in ages but here is my concern. I believe you need to make sure that the $12,000 you are crediting as earnings as of 12/31/2025 ($62k-$50k) is no less than the amount of earnings you would credit if you used the applicable AFR for the period from the date of the original deferral to the vesting date. Your stub year calc methodology looks reasonable. I looked at a document I have on this and, at least at the time we looked at it, there was not a ton of authorities out there to review (I didn't look to update this). I pasted authorities from that document down below. In each of the authorities listed, it appears that the operative term under each is the “amount deferred”. So our interpretation was that if you use the lag method and pay on the later within-3-months’ date, earnings are calculated from the date the original amount was deferred through the date of payment, compounding annually using the AFR for each January during this period. The parenthetical under Ex. 4 seems to support this interpretation also. Not advice, just my thoughts…. Treas. Reg. §313121)v)(2)-1(f)(3) states: Lag Method. Under the alternative method provided in this paragraph (f)(3), an amount deferred, plus interest, may be treated as wages paid by the employer and received by the employee, for purposes of withholding and depositing FICA tax, on any date that is no later than three months after the date the amount is required to be taken into account in accordance with paragraph (e) of this section. For purposes of this paragraph (f)(3), the amount deferred must be increased by interest through the date on which the wages are treated as paid, at a rate that is not less than AFR. If the employer withholds and deposits FICA tax in accordance with this paragraph (f)(3), the employer will be treated as having taken into account the amount deferred plus income to the date on which the wages are treated as paid. Treas. Reg. §313121)v)(2)-1(f)(4) Examples: Example (1). (i) Employer M maintains a nonqualified deferred compensation plan that is an account balance plan. The plan provides for annual bonuses based on current year profits to be deferred until termination of employment. Employer M's profits for 2003, and thus the amount deferred, is reasonably ascertainable, but Employer M calculates the amount deferred on March 3, 2004, when the relevant data is available. . . . . Example (4). (i) The facts are the same as in Example 1, except that an amount is also deferred for Employee B which is required to be taken into account on October 15, 2003, and Employer M chooses to use the lag method in paragraph (f)(3) of this section in order to provide time to calculate the amount deferred. (ii) Employer M may use any date not later than January 15, 2004, to take the amount deferred into account (provided that the amount deferred includes interest, at AFR for January 1, 2003, through December 31, 2003, and at AFR for January 1, 2004, through January 15, 2004). Preamble to the Final Treas. Regs. Under 3121(v)(2) (TD 8814) At page 18, states: Further, the final regulations provide that, under the second alternative method, the lag method, an employer may treat the amount deferred on any date as wages paid on any date that is no later than three months following the date the amount deferred is required to be taken into account. In addition, in response to comments, the final regulations simplify use of the lag method by permitting the FICA tax due to be calculated using a fixed rate of interest, not less than AFR, rather than on the basis of income under the plan. Text accompanying footnote 2 states: Alternatively, FICA tax payment can be postponed by treating the entire amount deferred as if it were deferred on a date that is within three months of the date the amount is otherwise required to be taken into account, provided that the amount deferred is increased by interest at the applicable federal rate (AFR) until it is included in wages.

I don't understand. How is it a 411d6 protected benefit? 411d6 protects accrued benefits, early retirement benefits, and certain optional forms of benefit distributions. AE is not a benefit within the meaning of 411d6. It's just a feature of how contributions begin where employees can always choose to stop contributing or opt out. (and frankly I don't see it as a BRF either). my 2 cents... which are frankly not worth much anymore... if ever.

most of our clients use 10 or 15 years... can't tell you why. The recordkeepers probably have more info on this topic.