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1. Yes 2. There is no mandated method, any reasonable method should be fine. A reasonable method might be to allocate the contribution in proportion to the pay credits earned for the year.

Agree that would be the best way to handle it but I don't think you should push it either. if another participant did a hardship request and the cost seems higher than what you think or their contractor charges 20% more, would you have the participant get another estimate? I say just have him provide the backup that you would normally ask and just follow your procedures.

This type of plan design relies on the ability to disaggregate the portion of the plan that covers otherwise excludable employees. Under this design, you have two groups of employees and two disaggregated plans. The first plan covers the group of employees who have satisfied the minimum age and service conditions under 410(a). That plan satisfies the ADP test by way of the safe harbor contribution, which is provided to all NHCEs (and optionally HCEs) who are eligible to defer. The second plan covers those employees who have not yet satisfied the minimum age and service conditions under 410(a). This plan will typically not cover any HCEs, since an employee has to have prior year compensation above the applicable limit to be considered an HCE, and employees who do not have a year of service will typically not have prior year compensation that high (if they have any at all). This plan satisfies the ADP test automatically as long as it covers no HCEs. If you have any employee who will be an HCE before they meet the statutory eligibility requirements, you can have a problem with the otherwise excludable group. Usually this would happen if someone who is a 5% owner by attribution (such as the owner's spouse or child) becomes an employee. If that is a concern you may want to specify in the plan document that 5% owners have to complete a year of service before they become eligible to defer. As sb0828 mentioned, if the plan is top heavy, they lose the top heavy exemption with this plan design. If we are talking about a 3% safe harbor non-elective contribution, then the sponsor is going to end up making the 3% contribution for all employees, except those who terminated before meeting statutory eligibility. The contribution for the employees who have not met statutory eligibility can be subject to a vesting schedule, although if the employer was not intending on making other contributions which would be subject to a vesting schedule then this may be more administrative hassle than they were prepared to deal with.

Hi Peter - the term "excellent thinking" has never been applied to me, even by people who want to borrow money. I'd say that at this point, a Plan Administrator isn't necessarily under any obligation to provide such information, but I'd reiterate that I believe it is a good idea. And I have no doubt that it'll be required at some point. I'm just afraid that the DOL, when they borrow Thor's Hammer to implement something, will use excessive force, as is their wont.

You may be right. After reviewing the OP again, I was assuming the following (should not have assumed): seller sponsored a plan, attorney's recommended the plan be terminated the day before closing, board resolution was drafted and signed timely to terminate the plan due to acquisition. Also assuming the plan was terminated, not just SH removed. If that is not the fact pattern, then my answer will need to be revised.

For what it's worth, when I log on to my personal 401(k) account online, one of the first items on the homepage is a notice about protecting online accounts. It links to a very thorough write-up about passwords, two-factor authentication, where to report if your account has been compromised, etc. As noted above, this may not be feasible for all plan types, but to me it seems more logical there than in an SPD. I also think it's more likely to be noticed and read on the plan website (which I have accessed many more times than my plan's SPD).

Hmmm. - just off the top of my head, without really considering more in-depth ramifications: At this point, I'd say bad idea. Data security and risk are not currently part of the plan's formal provisions. Introducing this into the SPD, particularly where the regulatory authorities have not (yet) published official guidance or Fiduciary "safe harbors" if certain protections are put in place seems, from my non-lawyer perspective, to put the Fiduciary at greater risk. But it may be just the opposite, I don't know! Giving information, such as the DOL's new informational piece, OUTSIDE of the formal SPD seems like a good idea to me.

The lawyer in me comes out with questions like this. First, it is NOT required - and that probably is the biggest reason I have for NOT including that language in a "plan document." It's inclusion would then set an expectation, if not an obligation on the part of the plan sponsor and service providers dealing with that data, which may, or may not, be consistent with what they are actually doing - at any given point in time. This is a huge issue among recordkeepers (one of which I work for) and it is extremely fluid. I can tell you that recordkeepers routinely share their knowledge of "threats" but do NOT share their approaches to safe-guarding data (and to do so would itself be a data security breach). We keep our data security protocols very very close to the vest, and are constantly reviewing them and changing them - lest the bad guys get wise and figure out how to subvert the protections. Second, while educating participants on general identity theft issues, might not the inclusion of a discussion about the risks in an SPD prompt a pull back from participation? That could actually be a bigger (retirement readiness) risk than the risk of an individual's account being hacked or data breached. In any event, most reputable service providers would make a participant whole for the loss of an account balance due to nefarious activity (provided the participant wasn't negligent themselves - like posting their identifying info online). We DO educate our plan sponsors on the risks, provide them with various assurances, AND provide a "promise" to plan participants that if they aren't negligent (there is a laundry list of things they must do or must not do to "comply"), that we will make them whole. So far, we've not seen much in the way of service providers being "hacked" but we have seen data from other hacks (Target, etc.) used to attempt to claim to be a participant and request a distribution ACH'd to a newly established account (from which it immediately moves off-shore). Protocols exist to identify and intercede there as well.

No. What happens if the plan terminates? Will they only fully vest actives? The only issue I'm aware of is that an amendment that increases benefits for former employees must be looked at for non-discrimination separately with respect to such former employees. If your group of former employees with balances is predominantly HCEs and many NHCEs have already been cashed out at the lower vested percentage, then you could have an issue.

Here’s the rule: https://ecfr.federalregister.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-C/part-2520/section-2520.104-46. Unless there is a reason other than that rule to audit the retirement plan’s financial statements, might the plan’s administrator revisit the prudence of its selection of the independent qualified public accountant? If not, the plan’s administrator might face a practical task of persuading the audit firm. Often, some evidence that the plan’s administrator considered a lawyer’s advice closes a point of this kind. Even if both the plan and its administrator lack its own counsel, a bank typically has counsel readily available. For example, Federal law requires a national bank that acts in a fiduciary capacity (in its business, rather than regarding employee-benefits plans for the bank’s employees) to retain “legal counsel who is readily available to advise the bank and its fiduciary officers and employees on fiduciary matters[.]” See 12 C.F.R. § 9.5(d). Some States have similar law.

Don't confuse a couple of issues here. If a participant gets a check in December of 2020, then he gets a 1099 for that money representing a 2020 distribution. Regardless of when he cashes the check. A plan can't shut down until all the money is gone. So money in an account because the check hasn't been cashed IS still a plan asset. That's why wire/ach/certified checks should all be used for a plan termination.