Company X sponsors a 401k plan. Company X was purchased earlier in 2025 in a stock sale to parent Company. Parent Company also owns Company Z with a 401k plan. Company X will be merged into Company Z effective 10/1 and both companies will be using the same payroll provide going forward which will be a change for Company X.  (Company X plan will merge into Company Z plan at end of plan year 12/31/25). Is it necessary to formally amend the Company X 401k plan document to freeze the plan and discontinue future contributions, or is the fact that they are moving to the new payroll provider and no longer sending payroll contributions sufficient? Can a Board resolution accomplish this in lieu of an amendment? Any thoughts are welcome!

Spouse and daughter (from previous marriage) both claim they are entitled to distribution of deceased participant's 401k plan account.  Plan administrator reviewed information from both parties and determined that the account be distributed to daughter.  Spouse appealed denial of his claim and submitted additional and new information in support of his appeal.  Attorney for daughter is asking whether she will be provided a copy of documents submitted by spouse in support of his appeal and whether she will have an opportunity to respond.  I cannot find anything in the claims procedure requirements that address this.  My thought is that if the plan administrator determines that the spouse's appeal is well taken and therefore the account should be distributed to him, that is tantamout to a denial of the daughter's claim, requiring the plan administrator to provide her a detailed explanation of the basis for the denial (which would include the information submitted by the spouse in his appeal) and triggering her own appeal right where she can submit her own argument/documents.  Thoughts?

This is my first time working on an age-weighted profit-sharing allocation.

The plan includes 5 participants: 1 HCE and 4 NHCEs. The plan effective date is 01/01/2021. The Normal Retirement Age (NRA) condition is age 65 with 5 years of service from the date of plan participation. The plan year ends on 12/31/2024, and it is not top-heavy for the current year.

After allocating profit sharing, the plan fails the 401(a)(4) nondiscrimination test.

The issue arises with the HCE participant, who is 70 years old and was hired on 07/05/2022. In the age-weighted allocation calculation, we initially used 2 years to NRA for the HCE, resulting in a significantly higher EBAR compared to the NHCEs—causing the plan to fail 401(a)(4).

However, based on Treas. Reg. § 1.401(a)(4)-8(b)(1)(ii), it appears permissible to cap the current age at 65 for participants who have already reached 65 age. While apply 0 years to attain NRA for the HCE (instead of 2), the plan passes the 401(a)(4) test.

My questions are:

Can we apply the age 65 cap for participants who are already past the plan’s NRA, in accordance with the regulation cited?

Can we change the HCE’s date of birth to reflect age 65 and revise the hire date to 2020 to help the plan pass testing purpose only —and is this permissible under any Treasury regulations?

Does the HCE need to satisfy the 5-year participation requirement to be considered as having attained NRA under the plan's definition?

Is there any regulation that allows us the years of participation (similar to how the NRA age can be capped at 65) to help normalize the EBAR calculation and pass nondiscrimination testing?

Any insights or guidance to help us accomplish a compliant allocation would be greatly appreciated.

Thank you in advance for your help.

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Hi all,

I'm having a bit of difficulty thinking through this scenario and could use some help.

Company A (two 50/50 owners) acquires 60% of Company B as of 04/01/24, and B Owner retains 40% ownership. Company B becomes a participating employer in Company A 401(k) Plan as of 04/01/24, and a transfer agreement is executed for Company B 401(k) Plan to be merged into Company A 401(k) Plan as of 01/01/2025. Companies A & B are a brother sister controlled group as of the acquisition. Both Plans pass coverage separately and combined at the time of acquisition (also the EEs of Company B all become employees and participants in Plan A as of 04/01/24).

Company B Plan had a standard SHM and Company A has a SHNE.

Company B consists of 2 employees prior to acquisition, 1 HCE (previously the 100% owner) and 1 NHCE. Company B HCE has >$345k comp from Company B prior to 03/31/24 and earns ~$170k comp from Company A the remainder of the year. Company B NHCE has ~$25k comp from Company B and ~$50k comp from Company A. No compensation is paid from Company B after 03/31/24.

1. I understand that Plan A and Plan B can be tested separately during the transition period for coverage, but are they allowed to be tested separately for other aspects as well (404, 415)? They pass 415 and 404 testing either way, so this isn't a crucial consideration, but I'd like to know how my tests should reflect and for future reference.
2. Does the compensation for 2024 Plan B testing have to include amounts paid by Company A as well, causing a SHM true-up for B NHCE? Both Plans exclude pre-entry compensation, so my thought is that the Plan A SHNE & PS calculations only consider the compensation paid after the B EEs become A Participants on 04/01/24.
3. Both Plans were top-heavy for 2024; Plan A made a discretionary PS allocation - does this cause Plan B to lose its top heavy exemption? If so, B NHCE's Plan B ER contributions are less than 3% of their total (A + B) comp, but B NHCE's total ER contributions (A SHNE + A PS + B SHM) are greater than 3% - does this satisfy the top heavy allocation? The B NHCE SHM/B NHCE Comp is 4%.

Checking a thought/curiosity as never dealt with it before nor have any idea.

Company has an existing 401k/PS plan for many years.

They need to add a second PS plan with better allocation provisions and then merge the new plan into the existing plan.

Upon merging, will the new PS plan's benefits need to be 100% vested, assuming the new plan's vesting service will start with the inception of the plan, assuming that the new PS can even have this provision?

Thank you,

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Thank you, as always, for all the insights.

1 . A Frozen DB Plan, owner and wife only (owner only plan).

2. Plan frozen after 12 31 2017

Avg comp at 12 31 17 was 117,000.

Formula was 10% of avg comp for each year of service. 

3. Had 6 years of service and 2 years of participation at 12 31 17.

4. As of 12 31 2017 the AB based on percent limit was $5,850. As his avg comp was 117,000 and this was reduced by 6/10 (as had 6 years of service at 12 31 17. (10% of avg  comp of 117,000 for each year of service was the formula at 12 31 2017 then frozen)

5. As of 12 31 2017 the AB based on the dollar limit was $3,583, since the 2017 415 dollar limit of 215,000 was reduced by 2/10 to reflect the 2 years of participation as of 12 31 17.

6  . Therefore his benefit at 12 31 17 was limited to 3,583 (lower of the dollar or the percent limit).

7 Question...if this frozen plan allows for increases due to increases in the COLA..

then

A. for 2018 would his AB be 3,666? (As the 415 dollar limit went up in 2018 to 220,000 and 220 reduced by 2/10... as had 2 years of participation as of 12 31 17 when frozen..

B. If the AB for 2018 is indeed 3,666 is this shown as an increase with a TNC or the the AB for the FT ( ie AB as of 1 /1/ 2018,) is simply increased and no TNC?

C. As the dollar limit goes up each year, would the AB keep going up annually until it hits the percent  limit  of $5,850 that he had as of 12 31 2017?

Thank you very much 

Client came to us with a solo 401(k). The client's annual additions to the 401(k) were, in reality, less than the maximum 415(c) limit for years 2019-2023. Unfortunately, the client understated his income on his federal income tax returns during those years. The client's new accountant is planning to file amended returns for those years to accurately report the client's income. Without the amended returns, the client "appears" to have exceeded the limitation in 415(c)(1)(B) (i.e., 100 percent of the participant's compensation) due to the understated amounts on his original tax returns. With the amended returns (which, again, accurately reflect the client's income during the years in question), the client was below the 415(c) limit each year. 

Can this issue be resolved by filing amended returns, or does the client need to use EPCRS to address anything? Because the client did not exceed the 415(c) limit in any year (after giving effect to the amended returns), my initial impression is that there is no need to distribute any excess annual additions. Am I thinking about this correctly? Happy to consider any other issues you may see.

Thank you for your time.

Would severance pay be considered be considered post severance compensation in the definition of 415 Statutory Compensation?  I'm pretty sure it would just want to get someone's confirmation.  Thanks for any help.

Can anyone recommend a legal or otherwise conference for an ESOP newbie? I am interested in expanding my practice. Thanks!

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Brain cramp, and I just want to make sure I'm not crazy. Due to a plan merger, short plan year ends October 10th of 2024. If I'm reading the instructions correctly, for a short plan year, the filing due date is the last day of the 7th CALENDAR month after the end of the short year. This would mean due date is May 31, 2025. Right? Then a 5558 extension would extend the due date to August 15, 2025.

Seems simple, but I'm getting some pushback, and I'm always willing to entertain the possibility that I'm a few cards short of a full deck. 

I have a DB plan where the plan effective date is for 2024, providing a vested benefit accrual as of 12/31/2024, but the plan did not fund until August 2025.   The RBD for the participant/owner was 4/1/2025.   Did she miss her first RMD even though there were no assets in the plan to take an RMD from?   Or maybe I am over thinking it.  This RMD is mute because it is for 2024 which is based on a 2023 accrued balance that did not exist?  Maybe her first RMD is actually due by 12/31/2025 for 2025 plan year based on 2024 accrued balance.

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I have a question about the timing of loan re-amortization to avoid default. I have reviewed Notice 2023-43, but would like to ask for thoughts.

Participant took a loan with a term of 3 years. Employer failed to start loan payments and the employee missed the first 4 payments. The employer found the error and began payments on the 5th scheduled payment. The plan uses the cure period so the loan is not at risk of defaulting assuming all future loan payments are paid timely. However, the employee and employer would like to bring the loan current, but the employee does not want to make a lump sum payment of 4 payments. The idea is to re-amortize the loan keeping it within the 3 year original payoff date and increase the payment amount slightly to still pay off at the original due date.

Do you see a problem with re-amortizing before the loan is in default? EPCRS talks about refinancing after default, but is there a reason why you can't refinance before default? I am getting a lot of push back from the TPA that re-amortization cannot be done unless the loan is in default (we don't want to miss payments on purpose, just to get into default so we can refinance).

Thanks

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The FT William pre-approved document allows us to select whether the Investment Fiduciary will be if not the Trustee.  Has anyone ever seen this used to name someone other than the Trustee (my plan does not have a directed trustee).

It looks like the default investment fiduciary is the plan sponsor. That doesn;t seem normal though because the norm is for the trustee to sign off on investment changes for example.