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Be careful, especially if they are asking for a rollover. I know you said they do not intend to retire this year, but if it turns out that they do terminate before the end of the year, then 2022 becomes their first distribution calendar year and now some of that money that was rolled over suddenly becomes an RMD that was not eligible for rollover. You might want to encourage them to take at least part of their distribution in cash.

To add a little more context, after decades of IRS not having an issue with the discretionary match language in these documents, they suddenly brought this up in the review stages of the C3 document. Their objection is that the fully discretionary matching contributions do not meet the requirements for definitely determinable benefits. Since it was brought up late in the C3 process, the new notice was a compromise to not have to scramble to redesign plans. My understanding is that the IRS will not make this compromise for the C4 document.

I know one or more people have asked about DC plan litigation statistics within the last year. I came across Part II in another newsletter and found Part I so linking these for anyone interested. https://www.callan.com/blog-archive/dc-plan-lawsuits/ https://www.callan.com/blog-archive/dc-plan-litigation/?utm_campaign=Headlines_102722_US&utm_medium=email&utm_source=Eloqua

You need to start with the premise that there never was a "loan". A loan is where you go to the bank and they give your the bank's money and you pay it back to the bank with interest. A 401(k) loan is where to go to your plan administrator and they give you your own money and your pay it back to yourself with interest. Once he left the company and they deducted the "loan" balance from his distribution and withheld taxes there was no "loan" left for him to repay....ever. It ceased to exist. What benefit would he accrue from paying back the loan. He cannot deduct it from his income. Tell him to make maximum contributions to the 401(k).

No need to do anything with the SIMPLE-IRA money - it is in fact an IRA. The critical part is "terminating" and not funding it. (I don't know that there is a formal termination process; it's more a matter of deciding not to do it and communicating that appropriately.)

Unless it is a fully-insured plan, all employees and former employees are considered "affected employees" for plan termination purposes. Since the resolution to terminate the plan was executed, this participant should be 100% vested. There is a section on the PBGC web site that gives examples of common errors in standard termination audits and this is one of them. "Not fully vesting terminated vested participants with less than a 5-year break-in-service." https://www.pbgc.gov/prac/terminations/standard-terminations

Even if they remain employed, rolling to an IRA would then create an RMD (or increase RMD) from IRA(s) next year - so this only makes sense if taking the cash (less 20% w/h).

You can't have both plans existing in the same calendar year. You are correct about not starting the 401(k) until 2023 (unless the company is on a fiscal year; that can make a hash of things). Yes, ask him what he is talking about.

And remember, if it's not REQUIRED, the distribution may be rollover-eligible and subject to mandatory 20% withholding rather than a waivable 10%.

The RMD is not required. The active participant didn't reach any point where a RMD is required. If the plan didn't have in-service distribution, the active participant cannot take *any* distribution until he terminates employment.

As of his rehire date, there is no loan. Let the guy do a QPLO makeup by his tax deadline, perhaps?

I think the regs do address it. 1.413-2(c) says that the exclusive benefit rule will apply to a MEP "in the same manner as under section 413(b)(3) and §1.413-1(d)" (e.g., collectively bargained plans). 1.413-1(d) says (emphasis added): I read this to say that forfeitures arising from contributions by one employer can be freely allocated towards participants of another participating employer. So there is no need, under the regs, to track each participating employer's forfeitures separately. That said, there is nothing that says you can't track forfeitures separately, and the participating employers may prefer to do it that way for their own purposes. Whichever way they want to do it, it might be wise to be explicit about it in the plan document.