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The six-year restatement period applies only to pre-approved plans. Thus, it would apply equally to a governmental pre-approved plan as to a nongovernmental one, and the relevant dates would be the same. Individually designed plans are required to be updated each year, but are not entitled to receive determination letters at all except upon adoption, termination, or certain corporate transactions. However, for a variety of reasons, governmental defined contribution plans are far less likely than private plans to be pre-approved plans: Many governmental plans are adopted on a statewide basis, and cover all employees in a particular job category (e.g., teachers, judges, legislators) within that state. Because they are larger than most private plans, they often have access to the kind of legal expertise that enables them to have individually designed plans. State and local governments, other than certain grandfathered ones, cannot legally adopt 401(k) plans, which are the most common type of pre-approved plans. The same pre-approved plan document cannot be used by both governmental and nongovernmental plans. Rev. Proc. 2017-41, Section 9.06. Thus, many pre-approved plan sponsors simply don't offer pre-approved plans to governmental employers. Governmental plans are subject to state law, and of course there are 50 different state laws, so it is harder to have documents that will work for all of them than it is to have documents that will work for ERISA-covered plans. To the extent that a governmental plan is not a pre-approved plan, the six-year cycle does not apply to it.

The requirement for an audit attachment to the Form 5500 is (mostly) related to plan size, so some plans that are close to the threshold might eliminate (or avoid) the audit expense by encouraging a few distributions.

Our plans have a cash out provision of $200, so anyone with a balance of $200 or less can be forced out. Most of our clients do pay a fee on their participant balances. I find that most of our participants take their money, or roll it over to a new plan or IRA.

It depends on the service provider and the terms of the service contract but if there is a per participant charge, the terminated participants with a balance are usually included in any billing charges.

David, "we" is "the employer" here

Welcome to the message boards, Shuo! I don't have a survey to back this up, but I'd guess that the median participant wants 2-3 years before taking a distribution of his or her account from a 401(k) plan. Most of the time the distributions are rolled into an Individual Retirement Account. Obviously, there is lots of variation around that median case. So a participant might not take a distribution right away but they usually aren't leaving their money in their former employer's plan for a really extended time period either. If a participant's vested account balance exceeds $5,000 (depending on the plan document, this might exclude any rollover contribution account), then a distribution can't be made without the participant's consent. A plan could force out a distribution as early as age 62 for those with vested account balances > $5,000, but this almost never happens. So, one has to deal with account balances of terminated vested employees. It's not much of a problem though. Recordkeepers are pretty good these days minimizing lost participant problems. It may be helpful to keep those accounts in the plan: they give the plan a greater pot of assets, which allows one to purchase more economical investment management.

Who is "we"?

my research indicates the IRS can force you to correct all years but in a disqualification situation can't collect taxes for closed years. i guess i was wondering if a plan was not qualified due to its operation whether the SOL applies. i think the answer is yes but still a little confused by it.

If this was easy, everyone would be doing it. Thanks for the reminder to look at the examples.

I think once "disqualified" it remains as such unless corrected via an IRS approved method (CAP program), so if the act that disqualified the plan took place 15 years ago and remains uncorrected (in the IRS' eyes), it is still not qualified, and the IRS can take "current" action against the plan/sponsor.

The failures are the cause of the disqualification. The IRS can find a plan to be disqualified even during closed plan years. I have seen the IRS take this position with plan document failures.

That's a typical actuarian comment.

I was wrong Apologies to Kevin C, AKconsult, NYHeel, and anyone else I missed. Example 3 in Treas. Reg. Section 1.401(k)-3(c)(7) is what convinced me that I was wrong. The example isn't quite identical to the original poster's question but close enough. It deals with a situation where elective deferrals are computed using a different definition of compensation than the definition of compensation that is used to compute the safe harbor matching contributions. It would have been a cleaner example if it had discussed and dismissed my objection based on the ratio of deferrals to match from 1.401(k)-3(c)(4), but it still seems to indicate that there is not a problem.

It's so tiring telling people that we could have provided options if they had only consulted us prior to the transaction. The M&A attorneys should be sued for malpractice.