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It may not be a pooled account but it is still a single plan, and the contributions are assets of the plan - not of any particular individual - until they are distributed. Yes, reallocate the excess contributions (plus earnings) to other participants. The plan document presumably says that all contributions will be allocated to participants' accounts, with a maximum of the 415(c) limit. You have an operational error since that limit was not applied correctly. You can self-correct the error by undoing the excess (remove those contributions from the participant's account) and then follow the plan document's instructions as to what should have been done with them (allocate according to the plan's formula).

it might take more than one person... If you are trying to satisfy the rate group test, then you need to get the right number of people into the HCEs rate group; enough to get that group to pass. That, to me, is as much art as it is science. If you are using the ABT, then, I guess you can get one person's EBAR high enough to get the group's average up, but I found that increasing a few people just a little bit might be better than giving one person an out-sized allocation. (eg: would you rather give one person making $30k a $1,000 contribution or 3 people making that amount $333?)

You can do the algebra and solve it out perfectly, but trial and error generally works fine for one person. And then they'll end up with a nice round number like $2,000 because it was way too much work to math out the actual 1,992.73 you might have really only needed to allocate.

I just had a plan that went through the entire plan termination process with the PBGC up to the point where annuities were purchased for all terminated participants and the plan was negotiating the purchase of annuities for the remaining actives. All filings were made timely. A week before the final PBGC filing was due, the company decided that it could not afford the contribution needed to complete the annuity purchases. The PBGC said as long as no distributions were made that relied on the termination as the distributable event and everyone who was sent an NOIT was given a notice was called off, the PBGC would acknowledge the withdrawal of the termination and the plan is back to business as usual. The plan was frozen so everyone already was fully vested, and we recommended an amendment to withdraw the termination to complete the documentation. Frankly, it was surprisingly simple.

Before allocating to others, one advice would be to have an input from the plan sponsor. You may choose someone because the math favors them but plan sponsor may not be happy about. Be watchful of the BRF issues as well. Also, when you say maximizing HCE's, you meant owners, correct? Bird/Bri and BG have excellent points.

Generally speaking, you would want to give more to the younger NHCEs as you get more bang for your buck that way. New comp testing projects contributions today to benefits tomorrow (at retirement) so the time value of money gives higher benefits to a younger person, all things being equal. Specifics depend on demographics.

Not terminating and unfreezing are two different actions. There should have been a resolution adopted to terminate the plan, so now a resolution to rescind the termination should be adopted. If the intent is to also unfreeze the plan then that should also be stated in the resolution - and if unfreezing applies to participation and benefits or just benefits. As you noted, that will require an amendment. If there was a plan amendment for the termination that made everyone 100% vested then I doubt if you can go back to 40% (unless specifically contingent upon plan termination) - but you can definitely go back to the vesting schedule for future accruals. If everyone was simply made 100% under plan terms pursuant to plan termination and the plan does not terminate, then maybe that is cause to revert to the vesting schedule. Was there an event or expectation thereof that gave rise to terminating the plan after only three years (potential red flag) that either didn't occur or was otherwise accommodated? Doesn't matter at this point but maybe an ongoing situation to monitor?

Thanks for the info. I didn't realize insurance companies still did this. "Back in the day" - about 30+years ago, (I'm so OLD!!!) it was fairly common. But anything I've ever seen "recently" - which is still going back many years, the individual annuities were "re-registered" as IRA's - assigned to the former employee, with some special language which might well have varied by company. Fortunately I never see this stuff. The idea of annuities making a comeback as funding vehicles in individually directed DC plans scares the Hell out of me from an administrative viewpoint.

HCE, NHCE, family member... all should not be an issue if the individual is excluded from participating by name as long as the plan passes coverage. If the plan uses rate group testing, then the individual will be in the test as non-excludable, and also the exclusion cannot be used to pass the reasonable classification part of the average benefits test. Short version, know where the mines are buried so they don't blow up compliance.

By and large if the stock price has gone up and they are caught up by the next payment most ESOPs I see call it the day. I guess a case could be made they could have made money in the market if they got 50% instead of 100% but I just don't see too many ESOPs worry about it. If anyone here has seen an ESOP pay some kind of lost earnings I would like to hear about it myself. If the stock price goes down the story quickly changes. You then pay them the better of the old or new price. So if the price goes down you pay the higher old price.

In general, you can exclude anyone from participation in a plan, as long as you have a definitely determinable way of doing so. You could exclude them by name; for example the plan could say that "The definition of Eligible Employee does not contain Joe Smith." There are other ways to do it as well. If the employees being excluded are all HCEs (and if they are the spouse/child/parent/grandparent of a 5% owner, then they are HCEs) then this exclusion should not cause any issues with your coverage test. How excluded classifications of employees will interact with the upcoming LTPT rules is still TBD.

Reallocate to other participants who aren't at their 415 limit.