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This is not my understanding, but it's possible I've misread something above. Reduction in hours worked is not a separation of service, nor a "suspension" (whatever that is). The NRA definition is NOT 5 years of vesting service, it is "fifth anniversary". Yes, this person will be 100% vested on that fifth anniversary date.

Correct - either apply a plan failsafe that is in place (which must be done if there is one) or do an 11g amendment within 9.5 months of PYE.

7.5% is the maximum gateway required in any combo situation - the gateway can never be higher but a greater contribution may be required to satisfy the nondiscrimination testing. Also be careful if your DB is a CB - the normal allocation rate is NOT the contribution crediting rate, so 3% SHNE + 2% PS + 2.5% CB does NOT equal 7.5% gateway.

That may be true for creditors of the IRA owner (the designated beneficiary of the plan participant that rolls over to the IRA). But creditors of the participant …. ? Why would there be a difference if the distribution is rolled over or not?

Yes, the difference is between the compensation used for allocation purposes and the compensation used for testing purposes and those do not need to be the same.

One final thought, looking at the text, it doesn't say that you can't do it (period), it says you can't do for purposes of reducing the average for your correction percentage.

Well, you can, but you do have to amend the plan up to 9.5 months after the end of the year to provide for the increased benefit.

An amount paid into a probate estate might become available to the decedent’s creditor. That is among the reasons not to name one’s estate as one’s retirement plan beneficiary (and to affirmatively name beneficiaries so a plan’s default provision won’t apply).

What if the person you are correcting would be in the OEX group and the group as a whole has a zero ADP. Would the correction be zero?

Yes.

A gate-way of 7.5% of 415(c)(3) compensation to all NHCEs is not a "safe-harbor" but I think I'd have a hard time coming up with an example where a 7.5% allocation didn't pass the gate-way part of the general test.

No. To satisfy the combo gateway, the aggregate normal allocation rate (ANAR) has to be at least 7.5% for all NHCEs if the ANAR for any HCE is greater than 35%. Aggregate means the sum of the DB and DC allocation rates. You convert the annual accrual in the DB plan into an allocation using the interest rate and mortality selected for testing. For NHCEs getting an accrual in the DB plan, you can also substitute the average DB allocation rate for all NHCEs instead of using each individual's allocation rate; this avoids having different PS allocation rates needed for every employee to satisfy the gateway.

Documents also usually exclude from deferrals non-payable income items such as tips that are collected in cash directly by the employee. I would get away from compensation and dig deeper into the deferral sections.

BG5150, Yes, the seller can do. See the regulation I quoted above, which addresses the rules for crediting imputed service (and says this could be a legitimate business reason for crediting service with another employer). It's a bit of a pain to deal with because it requires some post-close administrative coordination between buyer and seller, but it's allowed, and if the buyer is willing to provide the data, those newly acquired employees may be more satisfied with their benefits than if they forfeited their employer money under the seller's plan.

The Plan Administrator is required to do what the QDRO says should be done so long as it is not prohibited by the applicable law or the requirements/restrictions of the Plan Document. If the Court says in the QDRO to make this or that election, it is binding on the parties. I think the attached has some application here. Advisory Opinion 1999-13A _ U.S. Department of Labor.pdf

EPCRS allows the participant to re-amortize the loan over the balance of the five year period. There is no need to report this as a deemed distribution. [EPCRS §6.07(3)(d)]

Depends on the terms of the plan, particularly the definition of eligible employee, and if X & Y are now one company XY or still separate companies X & Y now within a control group. Plans often exclude employees related to a transaction until the end of the transition period referenced by Bill and often exclude employees of an affiliated employer unless that employer adopts the plan for its employees. Agreed, and it still amazes me how retirement plans continue to be ignored during due diligence and then subject to scrambling damage control thereafter - at least in the smaller company market.

I have heard that before but I don't think so. If we take that logic one more step what is the value of the stock the second after the transaction closes? Isn't it the amount of cash divided by the number of shares? I capital transaction that sells shares isn't supposed to increase or decrease the value of the shares if it happens at FMV. It does lower EPS in active companies but if the new shares are bought at FMV the increase of cash on the balance sheet is supposed to offset the decrease caused by the effect of EPS going down. I would add a company with no assets or operation can have value. If the idea for the business and expected management are set up you can make a legit claim there is an expectation of future earnings the stockholders will benefit from. In the end appraisers will tell you the value of a stock is the net assets plus the present value of the future earnings. The big unknown is what is the future earnings to do the present value calc on. That is why ESOP stock appraisals always look at management projections. They use other methods to benchmark and make sure that method is grounded in markets if possible but the big driver of any ESOP appraisal is the projections of the businesses earnings.

Someone more knowledgeable than me might think differently, but I think a QDRO can limit/force options for AP, it just cannot provide something the plan does not allow. With respect to a deferred benefit compared to an immediate benefit, most QDROs I've seen allow AP to wait to commence until participants commences, but must commence no later than that. That is, if participant retires and starts at age 65, AP cannot defer until age 72 RBD. And AP never has the option of a J&S.

My take on this is that it probably is a PPT. The reason being, that while 6 our of 85 is below the IRS' *rule of thumb* of 20%, it is, in fact, 100% of the employees for the *company sold.* I've seen the IRS apply the total number of employees in the company/division/office sold/transferred/shut down as the denominator for purposes of determining whether the PPT occurred (which, unless some of those ee's are transferred elsewhere within the original employing organization) often exceeds the rule of thumb 20%. And I agree - it's probably the right thing to do anyway. I wouldn't recommend continuing to vest these people based on service with the buyer - requires an ongoing close relationship that most companies don't want to get involved with.

The PPT rules are facts and circumstances with the presumption of a PPT if more than 20% reduction. If sponsor deems they did not have a PPT then normal 5500 reporting won't trigger any presumptive PPT flag for such. However, the plan sponsor could deem this a PPT as it was their action that initiated termination for an entire business unit (CG/sub company). There may not be a legal requirement but it might be the right thing to do, especially since those employees are going from having a plan to no plan. Another option that I've seen, continue to count their service with the new owner for vesting on accounts in the seller's plan, provided they leave their accounts in until fully vested. So if 40% vested with 3 YoVS at time of sale, if person stays with buyer for 3 more years and leaves account with seller's plan, they then become fully vested and can take full distribution and roll over if desired. This should not be very difficult to track for 6 people.

It depends on the distribution timing policy. If your plan allows for withdrawals of rollover money at any time, then you'd have a benefit offset. If the rollover money isn't distributable until some later time (age/service/etc.) then you have a deemed distribution instead.

If X acquired Y, your best bet is to likely take advantage of the 410b6 transition phase. Leave Y alone and keep the plan in place until the end of the year. Start a new plan for X if you wish. Then merge them and turn the safe harbor off for 2023. That's just one option. The best option would have been to make all the decisions before the purchase.

Some plans allow a beneficiary to disclaim a death benefit; some plans do not. If a beneficiary makes a legally valid disclaimer that the plan’s administrator accepts, the retirement plan benefit will be distributed (or distributable) as if the disclaimant had died before the participant’s death (or before the creation of the benefit disclaimed). If a beneficiary makes a valid disclaimer that also meets all requirements of Internal Revenue Code § 2518 (see 26 C.F.R. § 25.2518-1, § 25.2518-2), the disclaimed benefit will not be in the disclaimant’s estate for Federal estate tax purposes, and will not be the disclaimant’s income for Federal income tax purposes. Some States have a similar rule for State estate or inheritance tax purposes. To be effective for Federal tax and retirement plan purposes, a disclaimer usually must meet all these requirements: 1. The disclaimer must be made before the beneficiary accepts or uses the disclaimed benefit. 2. The disclaimant must not have received any consideration for the disclaimer. 3. The benefit must pass with no direction by the disclaimant. 4. The disclaimer must be in writing, and must be signed by the disclaimant. 5. The writing must state an irrevocable and unqualified refusal to accept the benefit. 6. The writing must be delivered to the trustee, custodian, insurer, or plan administrator. 7. The writing must be so delivered by nine months after: a. the date of the participant’s death, or b. the date the beneficiary attains age 21, whichever is later. 8. The disclaimer must meet all requirements of applicable or relevant State law. To write a disclaimer (and to get advice about what the plan’s administrator would accept), the beneficiary might consult her estate-planning lawyer.

Does the Plan have default investment language?

Why is it the employee's responsibility to open an account? The plan has to have a trustee. This is the trustee's duty. DOL rules on this are quite clear - it has to be deposited as soon as administratively feasible. There is a 7-business day safe harbor for small plans.

1000% agree, phantom losses does not reduce the required contribution

Then I would just deposit the gross amount. The ER should not get a windfall b/c there were losses in the market. Note the file. Move on.

Safe harbor amounts aren't late until the 12/31 following the end of the plan year - that's the date they were truly due. (As CBZ noted, that's independent of their deductibility.) Unless we're talking about a payroll-based SH match, those are due by each succeeding quarter-end.

It would have had to be deposited by September 15 in order to be deductible for 2020, assuming that the employer's tax filing deadline including extensions was September 15. However deductibility is not a qualification requirement, so the fact that the employer failed to make the contribution by the deduction deadline is not in and of itself a qualification failure, and therefore not correctable under EPCRS.

If the participants have an existing balance from before the allocation date, then their actual return is appropriate; and if it's negative then so be it, they are then benefitting by getting the monies whole at this later date. If they did not have an existing balance (safe harbor non-elective?), then they would be credited with the return of the highest performing fund. Again, if all the investments lost value, then they "benefit" from getting the whole amount now. The VFCP calculator is only appropriate for late deferrals and loan payments that are to be corrected through the precepts of VFCP; EPCRS does not recognize the awarding of a flat% return for lost earnings unless the calculation of actual earnings would be burdensome. However, even then you would be restricted to a market-driven determination.