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Why? As mentioned in a previous thread, if the merger documents are properly defined and executed, the location of the assets is NOT relevant.

Yes, the cash out threshold is now $7,000 if a plan chooses to implement. Amendment need not be adopted until the end of 2026 but be sure to document the decision and implementation timing because amendment must match operation. Cash out, however, does not mean simply paying a lump sum, it means providing the 402(f) notice and the ability to make an affirmative election (rollover or payout) with at least 30 days to decide, and then making a default IRA rollover if no affirmative election is made within the minimum 30 day election period.

Typically the merger of plans is based on the transaction date of the sponsors of the two plans. I’ve never seen plan custodians (RKs or BDs) able to make a merger/transfer of assets happen on that date. Maybe you have. Just not the world I’ve inhabited. So having the plans merge on X date and the assets transferring within a reasonable period after that just hasn’t been a huge issue.

Peter, who the heck knows? So many clichés about chaos and ineptitude come to mind I'm just paralyzed by the choices to comment. Maybe things will be different come 2029 if there is still an IRS by then, but thankfully won't be my concern any more.

@Mleech Also see prior discussion here:

Austin: Of course the merger agreement governs, and of course you can write the agreement as you see fit. I think the people here are expressing concern that being non-specific on the date ("when assets transfer") and the inadvisability of delaying the merger of the plans beyond the merger of the entities. As far as a non-specific date, consider 1) that may require additional audits (each "plan" requires it's own audit if large enough; 2) with various "puts" and delayed transfers for a variety of funds, the "last" asset transfer date may be 1, 5 or even 10 years out; and 3) each plan will require it's own 5500..... There are other issues as well. Most acquirers I've worked with generally want the newly acquired employees participating in "their" plan as soon as they become employees (and if you don't, then you have to deal with contributions to two plan, aggregated or not testing issues and the like) - so if you don't merge the plan, each must be amended appropriately to handle the other (hopefully) frozen plan. I can't tell you how many times we've had operational errors because of failures to properly end participation in one plan when allowing it in another. Reconciling assets held away is easy compared to the complexities that can arise if NOT merging the plans "legally" even if there is a delay in asset transfers....

@austin3515 If the merger effective date is already spelled out in the merger documentation, I don't see the point of using the transfer date as the effective date of the merger in the AA. I see the merger and the transfer as separate issues, and to me it is natural that the transfer date follows the merger date. Perhaps I'm missing one thing though... Do you already have plan merger documentation at this point or are you generating that documentation?

Adoption Agreement / Participation Agreement. Like Bill said above, I'd go by the transaction date or effective date in the merger documents. The trailing assets are not an issue as long as its done within a reasonable period following the merger.

50?! i.e 3 hours and 20 minutes per plan? assuming no data issues, all provisions are standardized, everything is passed on the first try and zero time spent on documentation and notes? double that. Here is another tip - in old good times we would put on a wall a large map with multipe colors highlighting the permissive aggregations. Might still be an efficient and relevant tool inspite of all the AI advancement.

I think Excel was commercially developed. That should do the trick, plus at least a 50 hours of billable time.

@Peter Gulia, commercially-developed software has limitations simply because attempting to program all possible testing scenarios would be cost prohibitive, be a nightmare to maintain, and still not be able to cover the universe of all possible testing scenarios. it also would consume a lot of computer resources and likely not be able to create reports that describe how the results were arrived at. Some software can be used to help if the input required to do the test can be accommodated reliably. Controlled group testing easily can expand rapidly, particularly when a plan actually is considered three different plans for purposes of coverage testing (deferrals, match and NECs). It would be not surprising that a group with 60 401(k) plans would result in needing over 150 separate tests. Big controlled groups exist, and compliance testing is being done, but it takes a lot of discipline, careful engagement management, broad knowledge of testing quirks and available software tools, and meticulous tracking of plans and census data. As @CuseFan said, "This is where we as consultants earn our money."

Effen is correct - for benefit determination you need not use consecutive but for 415 FAE hi-3 it must be. Also, and this applies to traditional plans with employees that are integrated with social security, you lose 401(l) safe harbor if you use average of non-consecutive years. We took over a plan where prior actuary amended for non-consecutive years for the client (via an "end around" on the AA) but never told them their safe harbor design went away and they needed to general test.

Very likely there is would be no issue doing the true-up through the termination date. If the original plan document language somehow was overly descriptive and explicitly prescribed the true-up calculation, for example, by referring December 31, then the easy fix is to use the plan termination amendment to specify a true-up as of the termination date. They may want to do this anyway since it is very simple to do. They will not want to wait until next year in any event since the plan will not be considered completely terminated until all of the benefits are distributed and the assets to to zero. If they paid out everyone shortly after the termination date and then made a contribution next year, the plan would need to file 5500 for next year (assuming a calendar year plan). Keep it simple.

@Bri is on the right track. You will need, for example, to track meticulously a lot of information about: tests to be performed by plan (Deferrals, Match, NEC), and across the controlled group or testing groups (410 coverage, ADP/ACP, 401(a)(4), 415, comp limits...) each plan's provisions (eligibility, entry dates, service accrual (hours/elapsed time), compensation, testing compensation, birth/hire/term dates, classifications...) plan years (hopefully all plans have the same year) any mandatory disaggregations (ESOPs?, current vs prior year ADP/ACP testing?, Safe Harbor vs Non-Safe Harbor?, unions??) any permissive aggregations that may be needed to pass testing census data for all employees of each employer census data for employees who worked for more than one employer within the controlled group testing strategy (ratio vs average benefits test, benefit accruals vs allocations...) any mergers, spinoff, or acquisitions within any permissible transition time period ownership at all levels. If there are Defined Benefit or Cash Balance plans in the mix, then there needs to be close cooperation between the actuaries and any others involved in testing. Look out for testing quicksand/tar pits: Keep in mind that the determination of HCEs is done across the controlled group and, generally, if one of the plans is not using top paid group rules, none of the plans can use the top paid group rules. 5% ownership rules applies at the employer level, ownership of a subsidiary can trigger unexpected HCEs, Plans with very liberal eligibility provisions. Union employees. Leased employees (who may need to be included in testing even if they are excluded as a classification). This is in many ways the tip of the iceberg and is not a comprehensive list. Testing this many plans within a controlled group is very labor intensive, and the complexity increases almost exponentially with the number of plans and employers involved. Be sure to price the effort properly and make sure you consider the fees that may be charged by other professional like outside legal counsel or independent actuaries. If this is your first time performing testing at this level of complexity, you will have lifetime memories from this project. You may want seek out someone who has done it before to provide some guidance and be a resource as your engagement progresses. Good Luck!

You can use a non-consecutive year average to determine the plan benefit. You can really use whatever you want, even a 1 year "average", however, the maximum 415 limit is still based on a highest 3-consecutive year average. Since the 415 maximum limits the benefit, most tax-shelter plans just use that for plan definition. I see highest 3 In the non-tax shelter world. I have several bargained plans that use a non-consecutive average. I don't like it in that setting because it leads to "spiking", where a person works a lot of overtime in a year, then coasts a few years.

usually plan's formula for oner-only plan is 10% of AAC (415 limit formula). Thus, there is no need to complicate things.

I would suspect it's indeed the 415 issue, if the plan's aggressively maxing the owner out anyway.

In my 40+ years, I've probably seen one or two plans that permit non-consecutive years in the FAC definition. Sorry, don't remember any of the details. Is it allowed? Of course. Is it wise? Probably yes for an owner-only plan. Caution don't forget about the 415 definition(s).

I think you have more problems to consider. Was the other company a participating employer? If a solo 401(k) "product" was used then likely not and the document also would have precluded eligibility of any employees. I think you have a demographic coverage failure as well. It's not that they were eligible and not told that they could defer, but I'd bet that under the terms of the plan they weren't even eligible. So not only do you need to fix the missed deferral opportunity - I'd say you have to fix any demographic failure and document deficiencies. You say owner didn't contribute in 2024, but what about other years, when was this a CG, when were there employees? There might be some other solutions here but you need to dig into all the relevant details. If these employees should have been eligible then I do not think zero contribution is an acceptable fix.

Peter, w/o knowing the exact facts, I do not see the time lag as problematic. My thought being, if done properly, the Plan Administrator (also likely Company X) instructs RK or TPA to initiate the involuntary cash out process which entails providing a 402(f) notice and at least 30 days in the election period. Adding administrative time on the front end and back end, a couple of months from start to finish is not unreasonable (if this is indeed how the situation unfolded). That begs the question and the initial ask from rocknroll2, if the cash out process begins when the account is under the threshold but exceeds such at the time of distribution, may it still be paid without consent?

Oh Lord are they giving us a new Form to file as well!?! 😏