Leaderboard

In a controlled group, moving from one employer to another within the group is not a distributable event from either employer's plan. Transferring an account from one plan to another will require each plan to have provisions to allow the transfer out and to accept the transfer in as a trust-to-trust transfer. This may not be a great idea if there are differences between the protected benefits in the two plans

Well heck, if we're getting semantic/pedantic, let's go further and say it's the 5th anniversary of the first day of the plan year in which participation commenced.

A plan does not lose safe harbor status. It has a failure that needs to be corrected. Follow the terms of the plan document. Assuming you have a pre-approved plan document, and this plan was designed to be an ADP/ACP safe harbor, the document certainly says that the plan will satisfy ADP/ACP testing by satisfying the safe harbor requirements. It must still do that - in a nondiscriminatory way. I bet somewhere in the plan document (buried in the BPD section on safe harbor contributions) it also says that the SH contribution must be based on a nondiscriminatory (not just reasonable) definition of comp. If the plan didn't do so, it has an operational failure that needs to be corrected by doing what it is supposed to do (no -11(g) amendment as this isn't a nondiscrimination or coverage failure, it was an operational failure). The plan should recalculate the match based on a nondiscriminatory definition of comp. (and I would do an annual/true-up allocation since the correct periodic match wasn't deposited by the end of the following quarter). That'll be in the BPD as well.

Yes, I guess I was thinking about a 2023 plan year based on a 0% ADP for 2022. But a 3% SHNEC could be adopted for 2024 before 12/1/2024.

And of course, I overlooked that it's still the 2024 minimum being paid based off 2023, so I do think they're going to have to recoup some of that IRA rollover to satisfy the RMD. (And adjust the amount coming out of the IRA for earnings since it was an ineligible rollover contribution. Hmmm, thinking out loud has me presuming only the "principal" amount coming from the IRA satisfies the RMD for the plan, like you couldn't count some of the earnings towards the RMD.)

A non-ERISA plan is not required to give an ERISA 204(h) notice. The plan only covers the 100% shareholder and their spouse, and no one else is eligible, so the plan is not subject to the notice requirement.

There is no prohibition on doing another DBP like the 401(k) successor plan restrictions, but make sure all the relevant circumstances concerning the termination of the first plan are legitimate and well documented, especially if the owners were under age 59 1/2 and the plan was in existence less than 10 years. Otherwise, IRS could possibly challenge the permanency of the first plan and view the termination and subsequent re-establishment as a circumvention of the in-service distribution rules.

For clarity, the individual must be fully vested upon attainment of normal retirement age, but it is possible for the plan to define normal retirement age as the later of attainment of an age not later than age 65 (i.e., it could be younger) or the passage of up to 5 years from the employee's commencement of participation in the plan [1.411(a)(7)(b)]. Note that this is NOT an accumulation of either eligibility or vesting years of service, but rather is the passage of time from the commencement of participation. If you want to see this in simpler language from the IRS, click here: https://www.irs.gov/retirement-plans/plan-participant-employee/when-can-a-retirement-plan-distribute-benefits @Coleboy1, check the plan's definition of normal retirement age to see if there is a time component.

I'd also be concerned that the change to the method used to calculate the safe harbor match would have to be disclosed in an updated safe harbor notice. Which obviously you can't do after the end of the year, so it would be impossible to make this change and retain the safe harbor. The result being that you lose the safe harbor and have to be ADP/ACP tested if you fail the 414(s) test.

Yes, a participant must become 100% vested upon attainment of normal retirement age as defined in the plan.

I like Lou's idea. but wonder...... Is there any thought that because the payroll-period SH match on the commissions would not have been deposited quarterly as is typically required, that somehow the adjustment now also has to include earnings from what would have been those "end of following quarter" deadlines?

Corrective -11(g) amendment to include commissions for NHCEs with a true up match calculation? That seems to be one way to handle it, there are probably others.

Is this for a DB plan termination? If so, and these are (more) excess assets, they should only be allocated to those who got plan termination distributions. If a DC pooled plan termination, then they got 12/31/2022 balance early 2023 and agree they are not part of the plan termination, but (as always) check your document to make sure it doesn't require anything different.