Leaderboard

Unless the PBGC changed their rules in the past few years, filing the Form 500 prior to the actual termination date is not a problem as long as everyone has received the NOIT and NOPB. One thing you do want to be careful of is you are filing for an IRS DL on termination, make sure you file the IRS DL before the Form 500 to get the extended distribution window. If you're not worried about the extended window you can file the Form 500 at any time after you confirm participants received the required notices.

Quoted from Fall 2009 Employee Plan News https://www.irs.gov/pub/irs-tege/fall09.pdf Compensation limits vs. elective deferrals/§415 limits Confusion may arise on how to reconcile the limits under §401(a)(17), §415(c) and §402(g) when an employee’s annual compensation exceeds the current §401(a)(17) limit. For example, can a 40-year-old employee earning $30,000 per month (annual compensation of $360,000) who elects to defer a flat dollar amount of $1,375 per month ($16,500 for the year) in 2009 to his or her 401(k) plan continue to make elective deferrals after September, at which time his or her yearto-date compensation exceeds $245,000? The answer is yes, because the plan is not required to determine a participant’s §401(a)(17) compensation based on the earliest payments of compensation during a year. Unless the plan’s terms provide otherwise, the $16,500 §402(g) elective deferral limit is applied uniformly to the $245,000 §401(a)(17) compensation that the employee receives throughout the year, regardless of whether deferrals are expressed as a dollar amount or a percentage of compensation in the employee’s salary reduction agreement.

From an operational side, you can obtain elections from employees who wish to rollover and then bulk roll everyone over. Further you also may want to address any plan loans and if need be roll them over as well. However keep in mind the loans will need to be reamortized as they will probably miss a deduction or two.

don't have it handy at the moment, but there is the IRS memo from 1998 that says it shall be in writing. I don't believe it says before, and we can probably come up with 20 reasonable interpretations of "written"

Agree no reason not to use individual groups. I believe there was conversation within the last month or two concerning documentation for allocations. I noted that in an IRS audit the agent asked for a copy of the memo that authorized the allocation amounts/percentages to each respective group. I believe a number of people noted their practice was to have the employer/plan administrator execute a simple memo authorizing the contributions as presented in the attached schedule (which shows the individual allocations as determined by the RK/TPA or whoever).

It's a per filing fee and your filing is supposed to correct all errors, so 2018 and 2019 all together. You/they should also review thoroughly for any other issues that may need correction and include as well.

Yes. Otherwise, from year to year, a group may get X% of pay as a contribution one year and then a flat $X another year - the allocation formula for the group is not definitely determinable, you don't know how you're contribution will be allocated. Think of the group - whether it's one person, 100 people or 1,000 - you must specify how you are allocating to the group. The method cannot be discretionary for the employer, only the per-group amount (or percentage) is subject to discretion.

You may want to review the substitution rule under 1.409A-3(f). In my experience, there is very rarely a voluntary relinquishment of deferred compensation without something else contemplated, either explicitly or implicitly.

As long as there isn't anything that would compensate the participant for the reduction (which could be viewed as an acceleration of benefit), it shouldn't be an issue under 409A.

There are anti-trust concerns if competitors discuss their fees. I suggest not doing so.

Just you Dave. The Plan Document to me is merely a collection of suggestions and recommendations.

Well, lots of documents with that language have received satisfactory Opinion and Determination Letters...

My bad (typo); I understand. Well certainly they are determining and presumably showing the allocation somehow. The problem is the offset, presumably on account balance, is a complete unknown.

If a plan sponsor does not want to have to test their allocations under the general test of 1.401(a)(4)-2(c) then they must use one of the design-based safe harbors. Generally this is not a big deal as most allocations which would satisfy one of the design-based safe harbors would readily satisfy the general test. An allocation formula which includes permitted disparity at an integration level less than 100% of the taxable wage base is an acceptable design-based safe harbor under 1.401(a)(4)-2(b)(2)(ii) and 401(l)(5)(A)(ii) which requires that the integration level "not exceed" the TWB. However it is not permissible to use anything other than the full taxable wage base when imputing permitted disparity on the general test under 1.401(a)(4)-7(b). Therefore a contribution allocated in this manner is not guaranteed to automatically satisfy the general test. A sponsor who wishes to allocate their contributions in this manner might prefer to rely on the design-based safe harbor.

No.

Peter, I've not found a good reason NOT to have everyone in their own group for allocation purposes.

You are going to inherit the "other people's problems" in a stock sale whether you terminate the plan pre-merger or not. That is why I asked. You can always quantify the risk in dollars and it brings down the purchase price or you may have a hold back provision in merger agreement. Either way, agree with JackS that due diligence is required.