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The deadline to make voluntary after-tax contributions is 30 days after the end of the limitation year. 1.415(c)-1(b)(6)(i)(C) Assuming limitation year = plan year = calendar year, your client missed it by a couple of days.

To me its 100% clear that the SH plan itself cannot be effective prior to the termination date of the SIMPLE. - 408(p) already says that the SIMPLE will not be considered a qualified salary reduction arrangement if the employer also maintained a qualified plan in the same year. - The exception created by S2.0 is when a SH plan replaces a SIMPLE mid year, because the after the termination date, the SIMPLE is no longer maintained. What 332 does is break the year into two periods, one with the SIMPLE and one with the SH. The two plans cannot be maintained during the same period. Sec 332(a)(11) Sec 332 also defines the transition year as the period beginning after the termination date and ending on the last day of the calendar year during which termination occurs.

The 401k plan cant be effective 1/1/24. The transition year (the 401k portion of the year) has to begin on the day following the termination date of the SIMPLE, and end on the last day of the calendar year during which termination starts.

Looks like the Cornell text has been updated to include SECURE 2.0 -- you can find it (along with other resources) here: https://benefitslink.com/research.html

Does anything here help? https://benefitslink.com/search/index.cgi?datasource=MYDB&textQuery=covered+compensation+tables

NQ plan distributions from an employer for which he continues to work? If plan permits he could defer receipt of payments not due within the next 12 months, providing such complies with 409A. This is compensation to him, not self-employment income for which he could do a solo plan - unless he was not an employee but a contractor service provider (then and now) with deferred compensation from the service recipient.

And they would have had to make the election by 12/31/2023

From EOB, you are correct. I wasnt 100% sure if the ADP and ACP Safe Harbors had to be satisfied and the answer is yes. Now you could have a match that is 400% of the first 6% and I believe that would work. 2. Certain safe harbor 401(k) plans are deemed not to be top heavy. A safe harbor plan is deemed not to be a top heavy plan (even if the top heavy ratio, if calculated, would exceed 60%) if: (1) the plan consists solely of a safe harbor 401(k) arrangement, either under the 401(k)(12) safe harbor or, in post-2007 plan years, the QACA safe harbor, and, (2) to the extent there are matching contributions made to the plan, all of the matching contributions satisfy the ACP safe harbor prescribed by IRC §401(m)(11) or, in the case of a QACA safe harbor plan, the ACP safe harbor prescribed by IRC §401(m)(12) (which cross-references the requirements of IRC §401(m)(11)(B)). See IRC §416(g)(4)(H), as added by EGTRRA §613.

Congrats Andy, enjoy for yourself what you've spent a career helping others attain - I'm jealous!

I'm so used to extending the termination date out to EOY that I didn't even think of pro rating the limits. Only 415 gets cut back? I'll have to have the purchase/sale document reviewed to see what it says, and then also to see if that's favorable for the owners. If they've already deposited their base deferrals for 2024, they could have already blown the pro rated 415 limit.

Thank you, AndyH, and thanks for reminding us all to recognize the amazing resource that Dave and Lois Baker have created for all of us. As I have moved between HR and TDA and back again I have benefitted from BenefitsLink and especially the forums to refresh my memory or to get up-to-speed on a new facet of retirement administration. Best wishes, AndyH, on your retirement, and gratitude to the Dave and Lois!

Congratulations on your retirement! Best wishes for fair winds and following seas in the years ahead. And thank YOU for the kind words, as well as for all of your contributions to these Boards over the years -- we're honored to have been part of your journey.

Congratulations! And we'd like to extend this Laurel, and Hardy handshake (sorry, my so-called sense of humor again). I have appreciated your commentary over the years. As with all such announcements, I'm very jealous, but nevertheless I very sincerely wish you a very long, healthy, and happy retirement! Take care.

Have had similar experiences with TIAA Annuity contracts. "Rev. Rule 2011-7 was issued to provide that a 403(b) plan meets the distribution requirements upon plan termination through the delivery to participants of a fully paid individual annuity contract..." (Groom Law Group "IRS Provides More Detail on Terminating 403(b) Plans" Nov. 19, 2020). Plan Sponsor "Ask the Experts" of January 16, 2024 indicates that a "fully paid individual annuity contract" means that the contract exists outside of the plan, in effect that the liability for the contract has been transferred to the annuity provider. The contract(s) still exist but the responsibility for the benefit and terms of the annuity contract now rest with the annuity provider and not with the plan. "Fully Paid" means that the Participants account balance has fully funded the contract; no future payments are required in order that the Participant receive benefits. In my experience with TIAA and 403(b) plans, it is clear that these requirements are met in the circumstance you describe. It is also true that TIAA will continue to carry the records for these contracts in the manner you describe. In other words, I think the requirement has been met. You can, of course, ask TIAA to list the contracts on a report without the plan sponsor's name but I have not had any luck with this and do not think it is actually required.

Amen!

A few additional thoughts: Merging plans is the best way to prevent leakage, and I understand why some advisors recommend it, but the reality is that it's often a major administrative hassle, particularly where the seller's plan has protected benefits that cannot be removed. Then the buyer is stuck with deciding whether to open up those protected benefits to all of its employees, or reserving them for a subset of legacy-seller employees, giving them rights beyond what the buyer's plan allows. In the best case, you're amending the buyer's plan document for most acquisitions. For acquisitive companies that do multiple transactions a year, this gets to be unmanageable over time, particularly on an individually designed plan where you are also chipping away at reliance on the last determination letter every time you amend. Short of merging plans, the only realistic option is terminating the seller's plan. There invariably is leakage. In my experience, acquisitive companies that have an established process for transitioning employees typically do a better job of getting assets rolled over. Several I work with present the rollover process as one package, asking participants only to sign and return the forms to roll over their balance, with the HR team handling the rest. A thoughtful and well-timed communication process can (again, in my experience) increase the rollover rate if it's the path of least resistance. Companies that terminate plans and leave it all up to the participant to request a distribution from the recordkeeper, I think, will lose many more assets in the transition. To Peter's question, I have not personally seen that, although I'm sure it happens. In my experience the final default distribution is almost always an IRA in the participant's name. Even if directly rolled over to the buyer's plan as a default, many (most?) plans allow a participant to take a full distribution of his or her rollover account at any time. This adds an extra step, but won't stop a person determined to get the money out. I do think there is a concern among some practitioners, whether warranted or not, that by merging a seller's plan into a buyer's plan the buyer's plan is more at risk for prior non-compliance in the seller's plan.

As Dave alluded to, you can't just offer lump sums to actives because "they would like to". There has to be a distributable event - attainment of normal retirement age, plan termination, death, disability, retirement, etc. I think you can slide down the in-service distribution age to 59.5, but not younger than that without terminating the plan. Regarding freezing accruals for those who take the lump sum prior to NRD, it seems like as long as the effect of the amendment is non-discriminatory, you could do it. I would make sure you accurately disclose everything to the participants, then it is their choice, but it feels pretty scummy. You would also be required to show the plan is non-discriminatory every year thereafter since they froze accruals for non-excludable participants.

MoJo, thank you for your observations about effects for an acquirer’s business. About some plan terminations, I long ago suggested that the terminating plan provide that the default final distribution, for a distributee who is (when the final distribution is distributed) eligible for the assets buyer’s plan, is a direct rollover into that new employer’s plan. Does anyone do that? About perhaps over-cautious lawyering: A century ago, it was common for one law firm to serve as a business’s counsel for all matters, and in lasting relationships over successive generations. That allowed for wider, sometimes almost holistic, advice. Now, a firm that works on a business’s acquisitions—even if it regularly does all of them—might have little or no other relationship with the business (and might not keep the relationship over time). If an avoidable risk happens, the firm will be criticized for not having gotten rid of the risk. But if a firm helps a client get good employees and good business productivity, the law firm won’t share in the win for those results.

Have I missed something? What is the distributable event?

One of my pet peeves.... The buyer acquires a lot of employees who have brand new pickup trucks and bass boats (leakage) - but no retirement savings. When then "advance in age" they become more and more expensive in many ways (not the least of which is health insurance costs) and IT'S ALL THERE OWN FAULT! Nothing that is a problem in a retirement plan can't be fixed - the only issue is who pays to fix it and when. That's what the deal documents should spell out, and why doing business with good recodkeepers/advisors can be invaluable (we will assist in due diligence). (off my soapbox for now)....

Even for an assets-only purchase, some buyers put in the deal agreement a condition that the seller’s plan is terminated before closing. While in theory an assets buyer is not responsible for a retirement plan the buyer never assumed, some buyers fear the many ways a buyer can be stuck with a bad situation. As we remind ourselves to Read The Fabulous Document, sometimes we add RTFD to the deal agreement.

If the late retirement provision use the greater of the actuarial increase or the age/service benefit, the actuarial increase will almost always be higher. Therefore, if the participant receives a lump sum, and the plan offsets future accruals by the actuarial value of prior distributions, there will almost always be no future accruals. IOW, the value of the prior distribution will exceed the value of the additional age/service accruals and no new benefits will be payable.

Just curious, if it's an asset sale, why is the plan being terminated *prior* to the transaction? As you point out, the company is on-going, and presumably can delay the termination until a time of their choosing, avoiding the short plan year and proration issues. That, IMHO gives them maximum flexibility going forward, and they can amend the plan as may be appropriate for those receiving the bonus (either count or not count).

Be mindful of coordinating the dates in the plan termination amendment with the strategy that the partners are considering. If the amendment sets a short plan year, you will need to factor in prorating annual additions and compensation limits. Also be mindful to coordinate the plan definition of compensation and net earnings from self-employment with the the plan year end date. The above items suggest reasons for having the effective date of the plan termination be as of 12/31/2024. If so, keep in mind that in order to file a final return Form 5500 (or SF), all of the plan assets must go to zero before the end of the plan year, or there will be an additional filing in 2025. I expect others on BL will have additional considerations to contribute to the discussion.

Internal Revenue Code of 1986 § 401(k)(14)(C) now reads: Special rules relating to hardship withdrawals For purposes of paragraph [401(k)](2)(B)(i)(IV)— (C) Employee certification In determining whether a distribution is upon the hardship of an employee, the administrator of the plan may rely on a written certification by the employee that the distribution is— (i) on account of a financial need of a type which is deemed in regulations prescribed by the Secretary to be an immediate and heavy financial need, and (ii) not in excess of the amount required to satisfy such financial need, and that the employee has no alternative means reasonably available to satisfy such financial need. The Secretary may provide by regulations for exceptions to the rule of the preceding sentence in cases where the plan administrator has actual knowledge to the contrary of the employee’s certification, and for procedures for addressing cases of employee misrepresentation. Congress has not enacted anything to repeal or amend that statute. This self-certification change applies to plan years that began or begin after December 29, 2022.