Tag Archives: 401(k) plans


Bad Tips for 401(k)s?
(Posted on November 29, 2025 by )


The fact that for 2025 through 2028, tipped workers may deduct up to $25,000 from their federal income taxes has been widely publicized. But what has not received a lot of attention is the negative effect this may have on their participation in 401(k) plans.

The problem arises from the fact that tips reported to the employer are reported on the the Form W-2 and subject to income tax withholding. The deduction for tips does not reduce wages for either of those purposes. And a 401(k) plan typically defines compensation from which 401(k) deferrals can be made as either Form W-2 income or compensation subject to withholding. So a tipped individual would be allowed to make 401(k) deferrals out of tips.

Normally, making 401(k) deferrals on a pre-tax basis provides a tax advantage to an employee by deferring taxes on the deferrals until they are distributed from the plan. However, in the case of a tipped employee, it may actually create a tax disadvantage, because it converts otherwise tax-free income into taxable income.

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IRS Benefits & Contributions Limits for 2026
(Posted on November 13, 2025 by )


The IRS has now issued Notice 2025-67, setting forth section 415 and several other IRS limits for 2026. Maximum employee deferrals under a 401(k) plan went up from $23,500 to $24,500. Catch-ups for those over 50 went up from $7,500 to $8,000, while catch-ups for those ages 60-63 stayed the same at $11,250. However (new for this year), catch-ups for those with previous year’s Social Security wages of at least $150,000 must be made as Roth contributions.

The Social Security Administration had already issued a news release indicating that the Social Security wage base will rise from $176,100 to $184,500 for 2026.

A chart showing details, and limits from 1996 to 2026, can be found at this link.

Fifth Edition of the Governmental Plans Answer Book Published
(Posted on June 9, 2023 by )


The Fifth Edition of the Governmental Plans Answer Book has now been published. The Governmental Plans Answer Book is the only full-length treatise on the law governing the retirement plans that federal, state, and local governments maintain for their employees. The law has changed a lot since the Fourth Edition was published in 2017, and the new edition has been updated to reflect them.

The Fifth Edition of Governmental Plans Answer Book gives subscribers the most relevant, current, and practice-oriented answers to the issues faced daily by plan administrators, attorneys, actuaries, consultants, accountants, and other pension professionals as they navigate the requirements and procedures involved in administering their plans. It examines the following significant changes and case law in this area: Read more.

New PowerPoint: New IRS Correction Rules for Retirement Plans
(Posted on October 13, 2021 by )


A recent CLE webinar provided employee benefits counsel, plan sponsors, and administrators guidance on identifying critical retirement plan issues and correction methods. The panel discussed new IRS self-correction rules and procedures and the primary focus areas of IRS and DOL examinations and audits.

The PowerPoint presentation for the portion of the webinar giving a step by step guide on correcting some common 401(k) plan issues is now available at this link.

IRS determination letters after 2016; what are the options?
(Posted on July 28, 2015 by )


Internal Revenue ServiceAs previously discussed, faced with substantial budget cuts, the Internal Revenue Service (“IRS”) has announced that it is eliminating most determination letters (letters concerning the qualified status of retirement plans, which gives rise to numerous tax benefits), effective December 31, 2016. (Announcement 2015-19.) In the past, individually designed retirement plans were able to obtain a determination letter once every five years, during a cycle provided by the IRS. The most likely new regime will involve making determination letters on individually designed plans available only when a plan is first adopted, or when it is terminated. Between those dates, the only way to ensure qualification other than filing a declaratory judgment action with the Tax Court is likely to be to adopt annual updates put out by the IRS that will include model wording for amendments.

For entities that maintain a retirement plan, the new regime may mean that they discover qualification issues only on audit, when it is too late to fix the issue. And the potential penalties on audit (for the employer, the trust under the plan, and the employees) are, as set forth in a prior article, huge. What steps should a plan administrator take to ensure the qualification of a plan after that point? Read more.

Governmental Plan Determination Letters: Last Chance?
(Posted on July 21, 2015 by )


irsOn July 21, 2015, the Internal Revenue Service (“IRS”) issued Announcement 2015-19, in which it announced that it would be making substantial changes to the determination letter program intended to allow retirement plan sponsors to ensure that their plans are qualified (eligible for tax benefits). This announcement will affect all retirement plans intended to be qualified, but will create particular issues for plans maintained by governmental employers (“governmental plans”). Read more.

EEOC: Discrimination based on sexual orientation or transgender status is prohibited sex discrimination
(Posted on May 12, 2015 by )


EEOCLogoFederal law contains provisions forbidding discrimination based on several classifications: race, sex, veteran status, etc. However, no federal law explicitly prohibits discrimination based on sexual orientation or transgender status. As a result, many employers in states which do not have their own legislation barring discrimination based on sexual orientation or transgender status have assumed that no laws prohibited such discrimination.

The Equal Employment Opportunity Commission (“EEOC”) has now called this assumption into question, by bringing several lawsuits treating discrimination based on sexual orientation or transgender status as a form of sex discrimination prohibited by Title VII of the Civil Rights Act of 1964. This issue is a focus of the EEOC’s Strategic Enforcement Plan for 2013-2016. Read more.