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As of this morning, it appears HHS has removed nearly all of the Section 1557 subregulatory guidance (FAQs and Fact Sheets). Entries still appear in search results on the HHS website (as of noon-ish on Feb. 5), but the content itself is gone. (Also see the link here to OCR's Section 1557 section -- it's broken.) Archived copies should generally be available at web.archive.org (although I didn't check for each and every missing page), but it does appear that the current guidance/enforcement may be changing.

If the transaction happened in 2023, your 410b6c transition period ended last December. Will each plan pass coverage, etc in 2025 on their own?

Bill Presson gives you a helpful description of Internal Revenue Code § 410(b)(6)(C)(ii)’s transition period with your stated assumption that “the change in members of a group” happened in 2023 and an embedded assumption that all plans’ years are calendar years. If a purchase closed on January 1, 2024 (rather than, for example, on December 31, 2023), that might result in a different § 410(b)(6)(C)(ii) transition period. Lawyers and accountants in deal teams sometimes consider accounting, banking, insurance, securities, employee-benefits, tax, and other consequences that might follow from exactly when a transaction closes. A deal some businesspeople think of as a December deal might have a transfer of ownership timed for January 1. A practitioner might check the details.

I have not had any clients offer incentives. If I may add a question, has anyone seen a plan with an auto-enrollment feature provide an incentive either for making an affirmative election to elect deferrals, or for not opting out of the default election by the end of the plan's opt-out time period?

Look beyond the distribution paperwork and look at the plan document. Most pre-approved plan documents have several sections addressing hardships. These sections answer questions like: which accounts are available (and under what circumstances)? is there an order in which accounts are accessed? are hardships limited to specific events? does the employee have to take an available loan before taking a hardship distribution? The documents are Cycle 3 documents. Note that the Bipartisan Budget Act of 2018 required certain changes to plan provisions related to hardship distributions. Final regulations were effective on or after 1/1/2020 and plans had to be amended to include the changes by 12/31/2021. Most pre-approved plans provided an Interim Amendment that added the required hardship amendments. Some of the new provisions were optional, so the Interim Amendments may or may not have modified the provisions in the original text of plan document. The Interim Amendments were very lengthy and often included a menu of choices for each provision. check to see if any Interim Amendments modified the plan provisions. All of this was happening during the pandemic, and a plan easily may have continued to use distribution paperwork and related procedures that do not reflect the plan documents and related amendments. On another note, if the plan is using a recordkeeper, the recordkeeper may have default hardship provisions in its service agreement that may or may not align with the plan document as amended. If copies of the plan document and the Interim Amendments are available, it should take less than a half-hour to confirm the answers to any questions.

Thanks Peter! We were thinking along the same lines. Filing Sched P will not hurt, but may help in the event of a tax controversy. It is only a 10 min investment to prepare the Sched.

Hardships have a 10% default federal withholding but you can opt out and elect a lower percentage, even 0%, or can elected a higher percentage if you want. But Hardships are not eligible for rollover and therefore not subject to the mandatory 20% federal withholding.