Frozen 401k plan

[cpc0506]

Client opted to freeze its 401k plan effective 12/31/16.  I understand that there are no more benefit accruals after that point.  The plan year ending is 6/30.  So we have period in the plan year that runs from 7/1/16 to 6/30/17 that the plan was frozen.  What compensation is used for testing purposes for the 2016 plan year?

[ESOP Guy]

Freeze is an unusual term for a 401(k) plan.  What do you mean?  How is this different from terminating the plan at 12/31/2016?  Did they just forbid deferring into the plan but it will be around for years to come? 

I believe the answer to my questions can make a difference as to what the answer to your questions is. 

[401_noob]

I thought that a 401(k) plan could only be deemed frozen if it applied for a determination letter after terminating and the process took longer than the 12 month period to pay out assets. 

Are there other instances in which a 401(k) plan can freeze? 

[cpc0506]

Client was in the process of being purchased and did not want employees to be able to defer into the plan after the purchase date but was not ready to terminate the plan.  They wanted participants to be able to continue to make loan repayments to the plan and get the loans paid off.  Employees started deferring into new employer's plan on 1/1/17.  The client has now requested that we terminate the plan effective 6/30/17. 

[ESOP Guy]

2 hours ago, 401_noob said:

I thought that a 401(k) plan could only be deemed frozen if it applied for a determination letter after terminating and the process took longer than the 12 month period to pay out assets. 

Are there other instances in which a 401(k) plan can freeze? 

I would use the word "terminated" in that situation still. 

[Bird]

I would use the term "amended to preclude future contributions" and I believe testing is based only on the period during which it was possible to make contributions.

[Bird]

To clarify, "frozen" might be an acceptable informal way to describe the activity.  But I try not to use informal words that have a real meaning in a different context and don't like it...had a very difficult time with a client once who kept using the term "distributions" to mean "contributions" and he was asking why we were giving "distributions" of new company money to participants who hadn't been employed for some time.  Sort of a "who's on first" routine b/c the conversation made no sense until we started talking about actual names involved.

[BG5150]

Bird, many firms, especially older ones (or, rather, those run by older folks), still refer to their profit sharing as a "distribution" of Employer funds to their Employees.

[K2retire]

18 hours ago, BG5150 said:

Bird, many firms, especially older ones (or, rather, those run by older folks), still refer to their profit sharing as a "distribution" of Employer funds to their Employees.

I've also run into that. It can be very confusing!

[BG5150]

KInda, sorta, like when they call the 3% non-elective a "match"