The Wagner Law Group 2026-06-18T16:04:25Z https://www.wagnerlawgroup.com/feed/atom/ WordPress /wp-content/uploads/sites/1101401/2021/06/cropped-wagner-fav-icon-2-32x32.png by The Wagner Law Group https://www.wagnerlawgroup.com/?p=68407 2026-06-04T12:03:14Z 2026-06-01T11:59:44Z

Schwab Clarifies That its Mass Proliferation of 'Wealth' Offices Nationally is Way to Generate 'Connectivity' - Ari Sonneberg, RIABiz, June 1, 2026 (PDF)]]> by The Wagner Law Group https://www.wagnerlawgroup.com/?p=68060 2026-04-01T19:36:31Z 2026-04-01T19:37:22Z

Democratizing Access to Alternative Assets for 401(k) Investors (the “Executive Order”), and is expressly designed to reduce litigation risk while reaffirming ERISA’s long‑standing, process‑based fiduciary framework. Although prompted by concerns surrounding alternative investments, the Proposed Regulation would apply broadly to all designated investment alternatives and would arguably represent one of the most consequential shifts in ERISA fiduciary policy in decades. Comments on the proposal are due by June 1, 2026. Background and Purpose The Executive Order directed the DOL to clarify fiduciary obligations when asset allocation funds or other investments include alternative assets - such as investment vehicles that invest in private equity and credit, real estate, commodities, digital assets (such as cryptocurrency), infrastructure - and lifetime income strategies. The Executive Order specifically asked the DOL to consider “appropriately calibrated safe harbors” that would enable fiduciaries to exercise sound judgment without undue fear of litigation. The Proposed Regulation would go further than the Executive Order requested. Consistent with the DOL’s traditionally investment‑neutral approach, the Proposed Regulation does not favor or disfavor any particular asset class. Instead, it articulates a general, process‑driven standard for prudently selecting any designated investment alternative. The DOL is candid about its motivation: according to the DOL, the current ERISA litigation environment has chilled fiduciary decision‑making, discouraged innovation, and pushed plans toward defensive menu designs. The proposal is intended to realign ERISA practice with statutory text, trust‑law principles, and decades of judicial precedent. Three Foundational Principles The preamble to the Proposed Regulation identifies three principles that underpin the Proposed Regulation:

1. ERISA is grounded in process, not outcomes. Prudence is evaluated based on the fiduciary’s investigation and reasoning at the time of the decision - not by hindsight or subsequent performance. Indeed, many practitioners colloquially refer to the prudence standard as being one of “procedural prudence.”
2. ERISA affords fiduciaries broad discretion. The statute neither mandates nor prohibits specific investment types; fiduciaries may select among a wide range of reasonable options.
3. Courts should defer to fiduciaries who follow a prudent process. When fiduciaries act within a documented, reasonable decision‑making framework, their judgments should receive substantial judicial deference.

The third principle - judicial deference that would be implemented under the Proposed Regulation through a presumption of prudence - is likely to be the focal point of legal challenges. The DOL anticipates this risk and grounds the proposal in existing trust‑law concepts and its statutory authority under Section 505 of ERISA, which the DOL asserts supports its authority to establish fiduciary safe harbors. The Safe Harbor Framework At the core of the Proposed Regulation is a process‑based safe harbor. A fiduciary that objectively, thoroughly, and analytically evaluates relevant factors when selecting an investment is entitled to a presumption of prudence and significant judicial deference. The Proposed Regulation identifies six non‑exclusive factors that would ordinarily be central to the analysis:

1. Performance: Fiduciaries must consider risk‑adjusted expected returns over an appropriate time horizon, net of fees. The rule expressly rejects any requirement to select the highest‑returning option over short periods.
2. Fees: There is no requirement to choose the lowest‑cost investment. Fees are evaluated relative to value, services, and expected performance; and fiduciaries are not required to scour the entire marketplace. Performance‑based and incentive fees may be appropriate when justified.
3. Liquidity: Plans are not required to offer fully liquid investments. Fiduciaries may select investments with liquidity restrictions, including illiquid assets, when liquidity tradeoffs are reasonably balanced against potential diversification or risk‑adjusted returns, so long as participant‑ and plan‑level liquidity needs are responsibly addressed.
4. Valuation: Designated investment alternatives must be capable of timely and accurate valuation. For non‑public assets, the Proposed Regulation generally anticipates at least quarterly valuation using independent, conflict‑free methods consistent with a certain specified accounting standard (FASB ASC 820).
5. Performance Benchmarking: Each investment should be evaluated against a meaningful benchmark with comparable strategy, objectives, and risk profile. Importantly, the Proposed Regulation states that new or innovative investments are not disfavored merely because they lack long performance histories.
6. Complexity: Complexity alone does not render an investment imprudent. Consistently with the notion that ERISA fiduciaries must be “prudent experts” (a phrase informally used by many ERISA practitioners when referring to ERISA fiduciaries), the Proposed Regulation highlights that fiduciaries must themselves understand the investment or must prudently engage qualified professionals to assist with evaluation and oversight.

The proposal includes 20 detailed examples illustrating how fiduciaries may satisfy these factors in practice. Presumption of Prudence and Judicial Review If the safe harbor process is satisfied, the fiduciary’s judgment is presumed reasonable. The DOL envisions courts applying a deferential, abuse‑of‑discretion‑type review, with plaintiffs bearing the burden of proof. It is noted that, in Loper Bright Enterprises v. Raimondo, the U.S. Supreme Court rejected the doctrine it had previously adopted in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., and dramatically generally narrowed or possibly even eliminated the extent to which the courts need to defer to agency regulations in interpreting federal statutes. Anticipating questions about judicial authority, the DOL grounded the Proposed Regulation in Section 505 of ERISA and framed the Proposed Regulation as deserving of deference established by the Supreme Court in Skidmore v. Swift & Co, a pre-Loper Bright case under which an agency’s interpretation is entitled to deference by a court in proportion to its power to persuade. Scope and Limitations The Proposed Regulation would:

• Apply only to the selection of designated investment alternatives.
• Not apply to brokerage windows or self‑directed brokerage accounts.
• Not address menu construction (which the DOL referred to as “curation”) or ongoing monitoring (although the DOL has signaled forthcoming guidance built on the same principles).
• Not alter ERISA’s duty of loyalty or the prohibited‑transaction rules.

Practical Implications If finalized as proposed and upheld by the courts, the Proposed Regulation would potentially, among other things:

• Reduce litigation risk for fiduciaries that document a prudent selection process.
• Encourage innovation in plan menus, particularly within professionally managed vehicles such as target-date funds and managed accounts.
• Reaffirm fiduciary flexibility to consider alternative assets thoughtfully.

It should be noted that the Executive Order also called upon the Securities and Exchange Commission (the “SEC) to take action with respect to the definitions of accredited investor and qualified purchaser, but the SEC was not given a specific deadline to do so. It is possible that coordination with the SEC could be critical in addressing non-ERISA practical impediments to the use of alternative investments under participant-directed plans, and the Executive Order (which by its nature is at the presidential level), unlike certain previous DOL sub-regulatory guidance, expressly calls for inter-agency coordination in this context. Any SEC guidance would be issued separately, as would any companion guidance from the Department of the Treasury. Conclusion The Proposed Regulations represents a decisive shift back towards ERISA’s fundamental underlying principles: discretion, process, and deference. While legal challenges may well be likely, the Proposed Regulation, if finalized as proposed, would materially strengthen fiduciary confidence in making reasoned, well‑documented investment decisions and could meaningfully expand the range of prudent options available to retirement plan participants. We will continue to monitor developments and provide updates as the rulemaking progresses. If you have any questions about the Proposed Regulation, or any questions about ERISA’s fiduciary provisions, please feel free to contact us.]]> by The Wagner Law Group https://www.wagnerlawgroup.com/?p=67954 2026-03-19T15:22:58Z 2026-03-16T15:14:04Z

Wealthfront CEO Disgorges his Mortgage Broker About a Month After the 'Textbook Conflict' Came to Light - Ari Sonneberg, RIABiz, March 16, 2026 (PDF)]]> by The Wagner Law Group https://www.wagnerlawgroup.com/?p=67896 2026-03-05T15:57:41Z 2026-02-27T15:49:39Z

With Schwab's New $5-per-RIA-Client Trading Fees Set to Activate Tuesday, Michael Kitces Calls it a 'Walking-Back' of Chuck's 2019, Zero-Commission Pledge - Ari Sonneberg, RIABiz, February 27, 2026 (PDF)]]> by The Wagner Law Group https://www.wagnerlawgroup.com/?p=67892 2026-03-05T15:46:17Z 2026-02-17T15:41:15Z

Merrill Lynch Files Motion that Berates 'Dynasty' for 'Reneging' on Arbitration - Ari Sonneberg, RIABiz, February 17, 2026 (PDF)]]> by The Wagner Law Group https://www.wagnerlawgroup.com/?p=67738 2026-01-19T17:21:31Z 2026-01-19T17:21:31Z

Protecting Prudent Investment of Retirement Savings Act (H.R. 2988), which proposes substantial amendments to the Employee Retirement Income Security Act of 1974 (ERISA). If enacted, this legislation would significantly restrict the consideration of non‑pecuniary factors in retirement plan investing. That would include restrictions on the consideration of environmental, social, and governance (ESG)-related factors. It would also impose new nondiscrimination rules for service provider selection, tighten fiduciary obligations with respect to proxy voting, and require enhanced disclosures for brokerage windows.  The bill restructures ERISA fiduciary obligations across four major divisions (detailed below), each targeting a different aspect of retirement plan governance. Division A - Increase Retirement Earnings Act This portion of the bill is aimed at limiting the use by retirement plan fiduciaries of non‑pecuniary factors in investment decisions, and would codify a strict pecuniary‑only standard for ERISA fiduciaries. Key elements of this division include:

• Fiduciaries must base investment decisions solely on pecuniary factors, defined as those expected to materially affect risk or return.
• Non‑pecuniary factors may only be used as a tiebreaker, and only if the fiduciary documents why pecuniary factors were insufficient; a comparison of alternatives; and how the non‑pecuniary factor being considered aligns with plan participants’ financial interests.
• ESG‑themed funds cannot be used as a Qualified Default Investment Alternative (QDIA) if their objectives incorporate non‑pecuniary goals.

This provision reverses Biden-era rules that permitted fiduciaries to consider ESG factors as part of a risk‑return analysis to be used as a tiebreaker when investments were otherwise equal. This element of the bill would become effective 12 months after enactment and, notably, would significantly narrow the circumstances under which ESG considerations may be used by fiduciaries in plan investment decisions. Division B - No Discrimination in My Benefits Act This division of the bill amends ERISA by creating a new fiduciary duty requiring that plan fiduciaries select and retain service providers in accordance with ERISA’s fiduciary standards, and without regard to race, color, religion, sex, or national origin. It would serve to codify nondiscrimination principles governing service provider selection directly into ERISA’s fiduciary framework. The bill does not specify the effective date for this division. Division C - Retirement Proxy Protection Act This division sets new standards for retirement plan proxy voting and shareholder rights. It would impose detailed requirements on fiduciaries when exercising shareholder rights on behalf of plan participants and require that fiduciaries act solely in the economic interest of the plan when proxy voting. The bill would require fiduciaries, when voting proxies, to consider costs, evaluate material facts, and maintain records of all proxy votes and related activities. In addition, fiduciaries would be required to prudently monitor investment managers and proxy advisory firms. The bill introduces several safe-harbor proxy-voting policies, including voting only on proposals materially related to the issuer’s business, and not voting when plan assets invested in the issuer are below 5%. The effective date for this provision is retroactive to January 1, 2026. Division D - Providing Complete Information to Retirement Investors Act The bill’s final provision amends ERISA to include new disclosure requirements for retirement plans that include a participant self-directed brokerage window. Pursuant to this new requirement, participants must be provided with and acknowledge a four‑part notice before directing investments into or out of a brokerage window. First, the notice must warn that brokerage window investments are not selected or monitored by plan fiduciaries. It must also notify participants that such investments may involve higher fees, higher risk, and diminished returns. The notice must contain a graphical illustration showing projected balances at age 67 under 4%, 6% and 8% rates of return. The bill also establishes a definition for the term “designated investment alterative” that specifically excludes brokerage windows, self-directed brokerage accounts and similar arrangements. This is consistent with existing Department of Labor guidance relating to that term. This provision of the bill is to become effective January 1, 2027. _________________________ While this bill did have limited bipartisan support in the House, a supermajority of 60 votes would likely be needed in the Senate to overcome a probable filibuster - a reality that makes it unlikely the bill will be enacted, at least in its current form. Consequently, we can expect the Department of Labor to continue active regulatory projects touching on ESG investing and proxy voting under ERISA.  Each of these projects appears on the DOL’s semiannual regulatory agenda. The implications of this bill for retirement plan sponsors and other fiduciaries, however, are to expect heightened scrutiny of ESG‑related investment strategies, to prepare for expanded documentation requirements for investment decisions and proxy voting, and to review service provider selection processes for compliance with new nondiscrimination standards. [author] [author_image timthumb='on']https://www.wagnerlawgroup.com/wp-content/uploads/sites/1101401/2021/07/Ari-Sonneberg.jpg[/author_image] [author_info]Ari Sonneberg specializes in the fields of ERISA and employee benefits. Ari advises and represents clients with respect to design, compliance and all other aspects of qualified and non-qualified employee benefit plans. He has extensive experience in drafting, designing, amending, and restating qualified and non-qualified employee benefit plans and related trusts, including money purchase pension plans, profit sharing plans, 401(k) plans, defined benefit plans, welfare benefit plans, medical expense reimbursement plans, 403(b) plans, and nonqualified deferred compensation plans.[/author_info] [/author] [author] [author_image timthumb='on']https://www.wagnerlawgroup.com/wp-content/uploads/sites/1101401/2021/07/Barry-Salkin.jpg[/author_image] [author_info]Barry Salkin concentrates his practice in ERISA and employee benefits law. He has significant expertise drafting, amending and negotiating various ERISA and employee benefit plans, including defined benefit pension plans, profit sharing plans, 401(k) plans, as well as qualified and non-qualified deferred compensation programs.[/author_info] [/author]]]> by The Wagner Law Group https://www.wagnerlawgroup.com/?p=67718 2026-01-15T14:43:08Z 2026-01-13T12:39:22Z

Wealthfront's Shares Nosedive After Tepid Flows and 'Stark' Revelation that its CEO Owns the Bank at Heart of Robo-Advisor's Mortgage Future - Ari Sonneberg, RIABiz, January 13, 2025 (PDF)]]> by The Wagner Law Group https://www.wagnerlawgroup.com/?p=67714 2026-01-15T14:38:41Z 2026-01-05T14:29:44Z

Envestnet 'Intentionally' Destroyed Crucial Evidence, a Judge Has Ruled - Ari Sonneberg, RIABiz, January 5, 2026 (PDF)]]> by The Wagner Law Group https://www.wagnerlawgroup.com/?p=67637 2025-12-08T15:01:35Z 2025-12-01T14:56:26Z

Pontera's Last-Bid Gambit to Turn Fidelity Credential-Sharing Ban Into an 'Investor Rights Issue,' Falls Flat - Ari Sonneberg, RIABiz, December 1, 2025 (PDF)]]> by The Wagner Law Group https://www.wagnerlawgroup.com/?p=67580 2025-11-18T14:46:26Z 2025-11-18T00:38:23Z

Fidelity Unit Warns of 'Massive Outages Across Major Fidelity Platforms,' in New Lawsuit - Ari Sonneberg, RIABiz, November 17, 2025 (PDF)]]> by The Wagner Law Group https://www.wagnerlawgroup.com/?p=67807 2026-02-04T16:25:53Z 2025-08-20T15:12:17Z

Envestnet's Six-Year Legal Fight Over Software 'Misappropriation' Dealt Likely Major Blow After a Key Ruling - Ari Sonneberg, RIABiz, August 20, 2025 (PDF)]]> by The Wagner Law Group https://www.wagnerlawgroup.com/?p=67296 2025-08-11T14:09:49Z 2025-08-08T14:03:46Z

Trump Labor Secretary 'Applauds' Trump and His Executive Order to Put 'Alts' in 401(k)s - Ari Sonneberg, RIABiz, August 8, 2025 (PDF)]]> by The Wagner Law Group https://www.wagnerlawgroup.com/?p=67135 2025-07-18T12:55:01Z 2025-07-16T12:43:10Z

Vanguard Sued by Direct-Indexing Founders for Allegedly Cajoling a Deal for Just Invest - Ari Sonneberg, RIABiz, July 16, 2025 (PDF)]]> by The Wagner Law Group https://www.wagnerlawgroup.com/?p=67101 2025-07-16T14:25:24Z 2025-07-14T16:02:36Z

Paid Family & Medical Leave Credit The OBBB permanently extends the TCJA-provided temporary tax credit limited to certain qualifying wages for paid leave and increases the creditable amount to 12.5–25% of paid leave wages or insurance premiums. It also provides for a reduced employee tenure requirement, from 12 months to six months. Generally, to qualify for the credit, a written family leave policy is required. Family leave benefits that are mandated by state or local law or paid for by state or local government are not eligible for the credit. An employer cannot take a business deduction for the cost of insurance premiums and also claim the credit. Childcare Credit & DCAP Expansion Under The OBBB, the childcare facility expense credit for employers is increased to 40% of expenses up to $500,000, or 50% up to $600,000 (for small employers), a drastic increase from the prior credit of 25% (up to $150,000). The new law also allows for third-party provider pooling and aggregator participation. In addition, the employee Dependent Care Assistance Program (DCAP) limits are increased to $7,500 (for joint filers) and $3,750 (for single filers) per year, respectively, from $5,000 and $2,500. Health Savings Accounts (HSAs) Under The OBBB, ACA Bronze/catastrophic plans will qualify as High-Deductible Health Plans (HDHPs).  The new law also provides that HSAs may be used to pay for Direct Primary Care (DPC) services up to $150/month for individuals and $300 for families. Finally, The OBBB makes permanent the safe harbor, originally put in place under the CARES Act in response to COVID-19, allowing pre-deductible coverage of telehealth and remote-care services under HDHPs without disqualifying HSA eligibility. Student Loan Repayment Benefit The TCJA provision allowing employer student loan repayments to be excluded from employee income (up to $5,250/year), set to expire after 2025, has been made permanent under The OBBB, with indexing for inflation beginning in 2027. Fringe Benefits Since 2009, employers were permitted to offer a tax-free reimbursement of up to $20 per month for bicycle commuting expenses (purchase, repair, storage). This benefit, however, was suspended by the TCJA through 2025 and has now been permanently repealed under The OBBB for civilian employers. Under the TCJA, the moving expense benefit deduction and income exclusion were suspended through 2025, except with respect to active-duty military. The OBBB permanently repeals the non-military moving expense benefits deduction and the exclusion from taxable wages. Executive Compensation Under prior law, executive compensation over $1 million per covered employee was non-deductible under Internal Revenue Code (IRC) § 162, but applied separately to each employer within a controlled group. Under The OBBB, compensation is aggregated across all members of a controlled group of employers, applying a global $1 million deduction cap. Qualified Small Business Stock (QSBS) Under The OBBB, the exclusion of gain from the sale of QSBS, is significantly enhanced for stock acquired after the bill’s enactment. These enhancements include:

• Tiered Holding Periods: Instead of the current flat five-year requirement for a full 100% gain exclusion, The OBBB introduces a phased-in schedule: 50% exclusion after three years of holding; 75% exclusion after four years; and, 100% exclusion after five years.
• Increased Exclusion Cap: The per-stockholder-per-issuer gain exclusion cap rises from $10 million to $15 million, with indexing beginning in 2027.
• Higher Gross Asset Threshold: The qualifying corporation size limit increases from $50 million to $75 million, also with inflation indexation starting in 2027, thereby including more companies in the QSBS benefit.

Full Expensing of Research and Development Expenses Domestic R&D expenditures incurred between January 1, 2025, and December 31, 2029, may now be deducted immediately. Retroactive relief is available for small businesses with average gross receipts of $31 million or less over the prior three years. Foreign R&D expenses remain subject to amortization over 15 years. Previously, under the TCJA, domestic research expenditures generally had to be amortized over five years (and 15 years for foreign research expenses). Permanent 100% Bonus Depreciation Bonus depreciation is a tax incentive that allows businesses to deduct a significant percentage (often 100%) of the cost of certain qualified property in the year the property is placed in service, rather than depreciating it gradually over the asset’s useful life. The OBBB reinstates and makes permanent 100% depreciation for qualified property placed in service from January 19, 2025, forward.   Prior to enactment of The OBBB, bonus depreciation was in a scheduled phase-down post-2022 (80% in 2024 down to zero in 2027). Business Interest Expense Limitation Calculation of the business interest expense limitation, which limits the amount of business interest expense that a taxpayer can deduct in a given taxable year, has reverted to the more lenient “Earnings Before Interest, Taxes, Depreciation, and Amortization” standard for tax years beginning in 2025. Prior to the enactment of The OBBB (since 2022), the interest limitation was calculated using a more stringent “Earnings Before Interest, Taxes” standard, which tightened allowable interest deductions. The definition of business interest expense has been modified to include certain capitalized interest. Enhanced § 179 Expensing Cap Internal Revenue Code § 179 allows businesses to immediately expense the full purchase price of certain qualifying property, rather than recovering the cost over time through regular depreciation. It is a tax election, not automatic, and is often used by small and medium-sized businesses to accelerate cost recovery and reduce taxable income in the year that property is placed in service. The OBBB increases the expensing limit to $2.5 million, with a phase-out at $4 million, and both are indexed for inflation starting in 2025. Under prior law, there was a $1.25 million cap with a $3.12 million phase-out limit, without adjustment for inflation. Optional 100% Expensing for Qualified Production Property Qualified Production Property (QPP) refers to a specific category of tangible property that is used in domestic manufacturing or industrial production activities. This category was expanded and specially designated under The OBBB to encourage U.S.-based industrial investment. The OBBB introduces QPP as a new tax classification designed to target strategic sectors, particularly those tied to manufacturing, advanced technology, national security, and critical supply chain resilience. QPP includes manufacturing equipment, industrial machinery, robotic systems, assembly-line components, and production-related software and control systems (if integrated into tangible assets). Specifically excluded from being categorized as QPP are real estate, office equipment not used in production, general-purpose vehicles and non-depreciable property. The OBBB introduces a new and elective 100% expensing regime for Qualified Production Property, separate and distinct from IRC § 179 expensing and bonus depreciation. Under prior law, similar production property expenses would generally only qualify for bonus depreciation or Modified Accelerated Cost Recovery System (MACRS) depreciation over 3–20 years, depending on asset class. The Qualified Production Property must either be property the construction of which began after January 19, 2025 and before January 1, 2029, or property acquired after January 19, 2025. Permanent Pass-Through (Qualified Business Income) Deduction The OBBB permanently extends the deduction for Qualified Business Income (QBI) at the existing 20% rate, which under the TCJA was set to expire at the end of 2025. A proposed increase of the rate to 23% was not included in The OBBB.  QBI is certain domestic business income earned by pass-through entities, including sole proprietorships, partnerships, S corporations and some trusts and estates. There is a minimum deduction of $400 for entities with QBI of at least $1,000 and the phase-in limit amounts were increased from $50,000 to $75,000 for single filers and from $100,000 to $150,000 for joint filers. Permanent Excess Business Loss Limitation The Excess Business Loss Limitation limits the ability of noncorporate taxpayers (such as individuals, trusts, and estates) to deduct business losses in excess of certain thresholds ($313,000 in 2025) against their nonbusiness income (e.g., wages, interest, dividends, or capital gains). The OBBB repeals the sunset provision for the excess business loss limitation, amends IRC § 461(l) to make the rule permanent for tax years beginning after December 31, 2025, and provides that any disallowed losses are carried forward as net operating losses.  In addition, The OBBB codifies technical clarifications from prior IRS guidance, including: the requirement to aggregate all trade or business income and deductions from pass-through entities owned by the taxpayer; and the application of the limit at the individual level (even if losses are passed through from multiple sources). Enhanced Opportunity Zones Opportunity Zones are census tracts nominated by states and certified by the U.S. Treasury as low-income communities. The law provides preferential capital gains tax treatment for investments in Opportunity Zones made through Qualified Opportunity Funds (QOFs), designed to spur long-term private investment in economically distressed communities. The OBBB enacts a significant extension and expansion of the Opportunity Zone program, including the extension of the capital gains deferral period from December 31, 2026, to December 31, 2029, and the reinstatement of the 10% basis increase for investments made before December 31, 2026, and held for at least five years (note that the 15% step-up for seven-year holds was not reinstated). The OBBB also authorizes states to designate new Opportunity Zones in 2026, based on updated census and economic data and incorporates reforms to enhance oversight and accountability. The types of businesses excluded from Qualified Opportunity Zone eligibility (“sin businesses”) have also been expanded under The OBBB. Form 1099 & 1099-K Reporting Thresholds The OBBB restores the pre‑2021 de minimis threshold for filing Forms 1099. As a result, Forms 1099-K (for third-party network transactions, e.g., Venmo, PayPal) are required only if payments exceed both $20,000 and 200 transactions per payee in a calendar year. The prior threshold for 1099‑K issuance by payment platforms had been reduced to amounts exceeding $600 in aggregate payments, with no transaction minimum. The OBBB also addresses the threshold for Forms 1099‑NEC and 1099‑MISC (for purposes of business payments reporting) by increasing the reporting threshold to $2,000 per payee per year, indexed for inflation after 2026, effective for payments made after December 31, 2025. Prior to The OBBB, business payments of $600 or more to a non‑employee (e.g., independent contractor, rent, legal services) triggered the requirement to issue a Form 1099‑NEC or 1099‑MISC. The OBBB mandates new 1099-style reporting to support emerging deductions including tip deductions (not taxed up to designated limit), overtime pay deductions, car loan interest deductions, and excise-taxed remittances. Tip Income The tip income provisions in The OBBB introduce critical changes to both the reporting and the deduction of tip income for employees in the service industries in which workers are customarily and regularly tipped, an issue with respect to which the IRS will need to issue guidance, aiming to improve tax compliance, increase tax benefits for individual earners, and provide more relief for employers in tip-heavy sectors. Tips are restricted to cash tips, so the IRS will need to confirm that credit card payments and payments in apps constitute cash tips. Payroll taxes are unaffected by the tip income provisions of The OBBB. The tip income exclusions are temporary and expire at the end of 2028. The OBBB requires employers to track and report tip income as part of wages for payroll tax purposes, ensuring accurate tax remittance. Employers are also granted a 100% deduction for the tips they report, provided they are properly documented and paid to employees. This allows employers to offset payroll taxes related to tip income. Additionally, under The OBBB, individual employees who receive tip income are provided a new above-the-line deduction from gross income of up to 10% of their reported tips, designed to cover expenses typically incurred by tip earners, such as personal clothing, travel, or business-related costs (not reimbursed by the employer). This new deduction comes with a cap and phase-down:

• The tip income deduction is capped at $5,000 annually per individual, regardless of the total amount of tips reported.
• For individuals with modified adjusted gross income (MAGI) above $100,000 (single filers) or $200,000 (joint filers), the tip income deduction will phase down gradually.
• The deduction begins to phase out for MAGI above these thresholds and is completely eliminated once MAGI reaches $150,000 (single) or $300,000 (joint).

The OBBB also expands the tip credit under the Fair Labor Standards Act (FLSA), allowing service industry employers to apply a larger portion of tips toward meeting the federal minimum wage. This credit is phased out for employers with gross receipts over $5 million, in line with a gradual increase in the federal minimum wage. Overtime Pay Under The OBBB qualifying workers can temporarily (until 2028) deduct premium pay received for overtime from their gross income.  This deduction is capped at $12,500 per employee, for single filers, or $25,000 for joint filers. For those with modified adjusted gross incomes (MAGI) exceeding $150,000 (or $300,000 for joint filers), however, the deduction is gradually phased out—reduced by $100 for every $1,000 of MAGI. The deduction is limited to the premium portion (i.e., the amount paid above an employee’s standard hourly rate) of overtime pay.  This deduction applies only to the mandatory premium pay under Section 7 of the Fair Labor Standards Act. Overtime pay that exceeds federal requirements due to state laws or union contracts does not qualify for the deduction. Employers must now separately report qualified overtime compensation on Form W-2.  Starting with tax years after December 31, 2025, withholding procedures will be updated to reflect this deduction.  For the 2025 tax year, a transition rule under The OBBB allows employers to use any reasonable IRS-approved method to estimate and account for qualified overtime compensation separately.  Employers should monitor IRS updates for additional guidance on this reporting and deduction process. Charitable Contribution Deductibility The OBBB includes several provisions affecting the deductibility of charitable contributions. Under The OBBB, corporations can deduct only those charitable contributions exceeding 1% of their taxable income beginning with tax years after December 31, 2025 - the 10% cap on deductions remains in place. While corporate contributions exceeding the 10% ceiling can continue to be carried forward for five years, amounts disallowed due to the new 1% floor can only be carried forward if the aggregate corporate contributions exceed 10% of taxable income, including the disallowed amounts. For tax years beginning after December 31, 2025, non-itemizing taxpayers may deduct cash contributions up to $1,000 (single) or $2,000 (joint), but contributions to donor-advised funds are not eligible for deduction.   A similar provision was in effect during the pandemic, permitting $300 above-the-line charitable deductions. The OBBB also provides that itemizing individuals may only deduct contributions to the extent that their qualified contributions exceed 0.5% of their adjusted gross income (AGI).  In addition, the TCJA’s temporary increase in the AGI limit for cash contributions to public charities (from 50% to 60%) is made permanent under The OBBB.  For high-income donors in the top tax bracket, the value of itemized deductions is reduced, now capped at 35% instead of 37%.   As a result, a $1,000 charitable contribution results in a $350 deduction, rather than a $370 deduction. Beginning in 2027, a tax credit of up to $1,700 is available for cash gifts to eligible scholarship-granting organizations, which cannot also be claimed as a charitable contribution. Under The OBBB, the federal estate and gift tax exemption increases to $15 million in 2026 (adjusted for inflation thereafter), and university endowments face a new tiered tax on investment earnings. [author] [author_image timthumb='on']https://www.wagnerlawgroup.com/wp-content/uploads/sites/1101401/2021/07/Ari-Sonneberg.jpg[/author_image] [author_info]Ari Sonneberg specializes in the fields of ERISA and employee benefits. Ari advises and represents clients with respect to design, compliance and all other aspects of qualified and non-qualified employee benefit plans. He has extensive experience in drafting, designing, amending, and restating qualified and non-qualified employee benefit plans and related trusts, including money purchase pension plans, profit sharing plans, 401(k) plans, defined benefit plans, welfare benefit plans, medical expense reimbursement plans, 403(b) plans, and nonqualified deferred compensation plans.[/author_info] [/author] [author] [author_image timthumb='on']https://www.wagnerlawgroup.com/wp-content/uploads/sites/1101401/2021/07/Barry-Salkin.jpg[/author_image] [author_info]Barry Salkin concentrates his practice in ERISA and employee benefits law. He has significant expertise drafting, amending and negotiating various ERISA and employee benefit plans, including defined benefit pension plans, profit sharing plans, 401(k) plans, as well as qualified and non-qualified deferred compensation programs.[/author_info] [/author]]]> by The Wagner Law Group https://www.wagnerlawgroup.com/?p=68003 2026-03-30T21:15:51Z 2025-05-30T20:59:24Z

An ERISA Journey for ESG via American Airlines By Way of Utah? - Marcia Wagner, Andrew Oringer, Barry Salkin, Jon Schultze, and Ari Sonneberg, 401(k) Advisor, May, 2025]]> by The Wagner Law Group https://www.wagnerlawgroup.com/?p=66508 2025-05-29T18:52:04Z 2025-05-29T18:52:04Z

by Ari Sonneberg and Barry Salkin On the heels of the Department of Labor’s announcement that it is rescinding the Biden Administration DOL guidance cautioning 401(k) plan sponsors from offering cryptocurrency investment options to plan participants, the Trump Administration has indicated that it will also take action to rescind the final rule issued by the DOL in 2022 providing that fiduciaries can consider environmental, social and governance (ESG) factors, as well as other collateral benefits in making retirement plan investment decisions. In a May 28^th letter submitted to the Clerk of Court for the U.S. Court of Appeals for the Fifth Circuit (the “Court”), Trump Administration attorney Daniel Winik informed the Court that the administration intends to engage in rulemaking, set to appear on the DOL’s spring regulatory agenda, in relation to the 2022 final rule.  The letter was sent in connection with the pending challenge to the 2022 final rule in the case of State of Utah v. Chavez-DeRemer, Docket No. 23-11097 (5th Cir. Oct 30, 2023).  The DOL had requested an indefinite extension of time from the court to consider what action it should take with respect to the 2022 final rule, but the Fifth Circuit rejected that request.  It is not clear whether the DOL intends to rescind the 2022 final rule and restore the rule from the first Trump Administration, or to issue a new rule. There are currently several active lawsuits by retirement plan participants alleging breach of fiduciary duty by plan sponsors for losses related to investment decisions made in consideration of ESG factors.  Perhaps most notably, Spence v. American Airlines, Inc., et al, Docket No. 4:2023cv00552 - Document 143 (N.D. Tex. 2024), in which plaintiffs alleged that plan fiduciaries violated their duties of prudence and loyalty under the Employee Retirement Income Security Act of 1974 (ERISA), by including in the plan funds managed by its primary investment manager that pursued non-financial and non-pecuniary ESG policy goals by way of proxy voting and shareholder activism. The District Court in American Airlines found that while the duty of prudence was not violated because the conduct of the fiduciaries at least met current industry standards, the duty of loyalty had been breached. The case is currently in the damages phase. Earlier this year, we wrote a Law Alert (available here) discussing the recent rocky history of the concept of considering ESG factors in retirement plan investment decision making.  That alert discussed in detail the first Trump Administration final rule that, while not explicitly mentioning ESG, required fiduciaries to justify any decision to take into account non-pecuniary factors in choosing plan investments, as well as the ensuing Biden Administration final rule that deemed ESG factors as just another set of considerations for fiduciaries, no different from pecuniary considerations, and removed the procedural requirements surrounding the consideration of ancillary investment-related factors found in the prior Trump final rule.  As the political tides turned, so now, again, has the fate of DOL regulation related to the consideration of ESG factors by fiduciaries in retirement plan investments.  Ultimately, however, ERISA’s requirement that fiduciaries act in the best interest of plan participants remains constant, and the results of pending litigation in this area may be the arbiter of how plan fiduciaries approach the consideration of ESG and other ancillary factors in selecting retirement plan investments. [author] [author_image timthumb='on']https://www.wagnerlawgroup.com/wp-content/uploads/sites/1101401/2021/07/Ari-Sonneberg.jpg[/author_image] [author_info]Ari Sonneberg specializes in the fields of ERISA and employee benefits. Ari advises and represents clients with respect to design, compliance and all other aspects of qualified and non-qualified employee benefit plans. He has extensive experience in drafting, designing, amending, and restating qualified and non-qualified employee benefit plans and related trusts, including money purchase pension plans, profit sharing plans, 401(k) plans, defined benefit plans, welfare benefit plans, medical expense reimbursement plans, 403(b) plans, and nonqualified deferred compensation plans.[/author_info] [/author] [author] [author_image timthumb='on']https://www.wagnerlawgroup.com/wp-content/uploads/sites/1101401/2021/07/Barry-Salkin.jpg[/author_image] [author_info]Barry Salkin concentrates his practice in ERISA and employee benefits law. He has significant expertise drafting, amending and negotiating various ERISA and employee benefit plans, including defined benefit pension plans, profit sharing plans, 401(k) plans, as well as qualified and non-qualified deferred compensation programs.[/author_info] [/author]]]> by The Wagner Law Group https://www.wagnerlawgroup.com/?p=66501 2025-05-29T14:15:52Z 2025-05-28T17:05:33Z

By Ari Sonneberg and Barry Salkin Today, the Department of Labor’s Employee Benefits Security Administration issued Compliance Assistance Release No. 2025-01, effectively rescinding Compliance Assistance Release No. 2022-01 (the “2022 Release”), issued under the Biden Administration, concerning 401(k) plan investments in cryptocurrencies. The 2022 Release cautioned plan sponsors against offering cryptocurrencies as an investment option to 401(k) plan participants. Specifically, the 2022 Release advised plan sponsors to use “extreme care” before offering cryptocurrencies as part of a 401(k) plan’s investment options. Today’s Release notes that, while the fiduciary duty established under the Employee Retirement Income Security Act of 1974 (ERISA) requires that plan fiduciaries act solely in the interest of plan participants, “with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims,” it does not impose the standard of “extreme care” that the 2022 Release sought to impose. Today’s Release further states that the recission of the 2022 release should be taken as an indication that the DOL is taking a neutral approach (similar to that historically taken by the DOL) to particular investment types and strategies that might be utilized by plan sponsors, and that it does not endorse or oppose the decision of any plan sponsor choosing to offer cryptocurrencies as an investment option in its 401(k) plan. While the 2022 Release did not have the force of law, it clearly had a chilling effect on the addition of cryptocurrencies and other digital assets to a 401(k) plan’s investment platform or availability under a brokerage window. Plan fiduciaries who had been reluctant to consider adding cryptocurrency as an investment option in light of the DOL’s 2022 guidance may now wish to consider whether the addition of a cryptocurrency investment option in some form would be consistent with their fiduciary obligations under the plan. As always, we advise plan sponsors to carefully weigh the risks and benefits of any investment option offered to plan participants. [author] [author_image timthumb='on']https://www.wagnerlawgroup.com/wp-content/uploads/sites/1101401/2021/07/Ari-Sonneberg.jpg[/author_image] [author_info]Ari Sonneberg specializes in the fields of ERISA and employee benefits. Ari advises and represents clients with respect to design, compliance and all other aspects of qualified and non-qualified employee benefit plans. He has extensive experience in drafting, designing, amending, and restating qualified and non-qualified employee benefit plans and related trusts, including money purchase pension plans, profit sharing plans, 401(k) plans, defined benefit plans, welfare benefit plans, medical expense reimbursement plans, 403(b) plans, and nonqualified deferred compensation plans.[/author_info] [/author] [author] [author_image timthumb='on']https://www.wagnerlawgroup.com/wp-content/uploads/sites/1101401/2021/07/Barry-Salkin.jpg[/author_image] [author_info]Barry Salkin concentrates his practice in ERISA and employee benefits law. He has significant expertise drafting, amending and negotiating various ERISA and employee benefit plans, including defined benefit pension plans, profit sharing plans, 401(k) plans, as well as qualified and non-qualified deferred compensation programs.[/author_info] [/author]]]> by The Wagner Law Group https://www.wagnerlawgroup.com/?p=67999 2026-03-30T20:55:33Z 2025-04-30T20:41:38Z

President Trump Issues 10-to-1 Deregulation Executive Order - Marcia Wagner and Ari Sonneberg, 401(k) Advisor, April, 2025]]> by The Wagner Law Group https://www.wagnerlawgroup.com/?p=66243 2025-03-28T12:08:48Z 2025-03-27T17:05:06Z

Domestic Entities: Legal entities duly established under the laws of a U.S. State or Commonwealth and their beneficial owners, are exempt from the requirement to submit an initial beneficial ownership report, or to update or correct a previously submitted report.

Foreign Entities: Legal entities formed under the laws of a foreign country that have registered to do business in any U.S. State or Commonwealth, and their beneficial owners, are exempt only from the requirement to provide the beneficial ownership information of any U.S. person who is a beneficial owner of the foreign reporting entity.

Deadline Extension: For foreign entities and their beneficial owners that are still required to report beneficial ownership information, the deadline to file initial beneficial ownership information reports, or update or correct a previously filed report, is extended to 30 days from the later of (i) the date on which the Interim Final Rule is published in the Federal Register, or (ii) the date on which the entity registers to do business within the United States.

The CTA’s standard for determining who is a beneficial owner, while now applicable only to foreign entities, remains an individual who owns or controls 25% or more of the entity’s equity interests, or who exercises substantial control over the entity.  Additionally, the Rule retains the existing exemptions from reporting for certain types of entities, a list of which can be found in our initial Law Alert on this topic.  The consequences for noncompliance with the CTA’s reporting requirements under the Rule also have not changed, and can result in substantial penalties, including fines and potential criminal charges. It is an understatement to say that the Interim Final Rule cuts down significantly on the number of entities that will now be required to submit beneficial ownership interest information.  FinCEN estimates that, as a result of the changes adopted under the Rule, there will be approximately 12,000 filings annually over each of the first three years of implementation, compared to the estimate based on the CTA’s original scope, predicting roughly 10,510,000 annual filings over each of the first five years.  While there is still pending litigation concerning the CTA’s beneficial ownership information reporting requirements, in light of the Interim Final Rule’s exemption of domestic entities and the resulting massive reduction in the number of entities impacted by the requirements, it is unclear what impact, if any, the outcomes of those cases might have. Domestic businesses that held out on submitting beneficial ownership reports in the hope that pending litigation would come to the rescue, can now breathe a sigh of relief as a result of the absolution that has come from the exemption in FinCEN’s Interim Final Rule.  Foreign entities should be prepared to submit required information by the deadline noted above. Our prior Law Alerts on this topic are available here: Corporate Transparency Act Beneficial Ownership Interest Reporting: Game Off…for the Moment – March 3, 2025 FinCEN Issues New CTA Beneficial Ownership Reporting Deadline After Court Lifts Nationwide Injunction – February 20, 2025 Corporate Transparency Act Litigation Continues to Induce Whiplash – January 24, 2025 No Rest for the Weary: Department of Justice asks Supreme Court to Issue a Stay of Nationwide Injunction Against Corporate Transparency Act (CTA) – January 2, 2025 Pencils Down: Corporate Transparency Act (CTA) Injunction Back in Effect – December 27, 2024 Fifth Circuit Court of Appeals Lifts Nationwide Preliminary Injunction Against Enforcement of Corporate Transparency Act Pending Ruling on the Merits – December 24, 2024 Texas District Court Issues Nationwide Preliminary Injunction Against Enforcement of Corporate Transparency Act (CTA) – December 4, 2024 FinCEN Beneficial Ownership Reporting Requirements Due by Year End for Many Organizations – November 18, 2024 [author] [author_image timthumb='on']https://www.wagnerlawgroup.com/wp-content/uploads/sites/1101401/2021/07/Ari-Sonneberg.jpg[/author_image] [author_info]Ari Sonneberg specializes in the fields of ERISA and employee benefits. Ari advises and represents clients with respect to design, compliance and all other aspects of qualified and non-qualified employee benefit plans. He has extensive experience in drafting, designing, amending, and restating qualified and non-qualified employee benefit plans and related trusts, including money purchase pension plans, profit sharing plans, 401(k) plans, defined benefit plans, welfare benefit plans, medical expense reimbursement plans, 403(b) plans, and nonqualified deferred compensation plans.[/author_info] [/author]]]> by The Wagner Law Group https://www.wagnerlawgroup.com/?p=66225 2025-03-27T14:15:51Z 2025-03-25T14:11:29Z

Schwab and Fidelity Halt of BlackRock's Money-Market Fund ETF Trades Was No Shock - Ari Sonneberg, RIABiz, March 25, 2025 (PDF)]]>