Kevin C

Or, maybe the participants involved are no longer employed?

And the answer is ... What does the plan say? Our VS document has a default provision for using a year of service for eligibility that credits the year of service at the end of the eligibility computation period. There is an optional provision that credits the year of service when the participant completes 1,000 hours. Without seeing the plan document, all we can do is guess.

Unfortunately, intentions don't terminate a plan, actions do. With a stock purchase, if the plan wasn't terminated, it belongs to the new owner now. If the new owner terminates the plan, there is guidance on your vesting question in GCM 39310. There could also be fiduciary issues if partially vested participants are paid while the plan termination is under serious consideration, but not yet in effect.

Doesn't look like anyone else wants to answer, so I'll try. First, the 301.7701-2 cite you mention says that single owner entities can be disregarded entities. Is this person the sole owner of each of the management companies? If so, you have other complications. See Derrin Watson's Q&A on overlapping controlled group and affiliated service group. https://benefitslink.com/cgi-bin/qa.cgi?db=qa_who_is_employer&n=342 To your question, I think the management ASG provision in 414(m)(5) prevents a 1-man plan in a situation like you describe. I think another rule will prevent it, too. Look at the definition of 415 compensation in 1.415(c)-2. For a self-employed person, it refers you to the earned income definition in 401(c)(2) and it's regulations. 401(c)(2) says earned income is determined "only with respect to a trade or business in which personal services of the taxpayer are a material income-producing factor". 1.401-10(b)(2) says that if a self-employed person is engaged in more than one trade or business, each trade or business is treated as separate employer for determining earned income and you only count the earned income from the trades or businesses that adopted the plan. The services here are being preformed for the management companies, which under 414(m)(5) are the same employer as the respective paired operating company. So, unless one or more of the ASG's adopt the plan, this person will not have any 415(c) compensation, so no plan benefits. If one or more of the ASG's adopt the plan, I doubt 410(b) and 401(a)(26) would let it be a 1-man plan.

Because Congress made compliance with 401(a)(9) a qualification requirement. I'll be a bit more direct than jpod's comment. If the IRS discovers the plan failed to pay a required minimum distribution, the plan will almost certainly end up in Audit CAP and the employer will be facing a penalty. Audit CAP won't cost any less than the VCP filing fee for the failure and it could cost significantly more.

If the plan documents allow these employees to participate in both plans at the same time, this could be a problem, too.

If I understand correctly, the question deals with a plan that only covers collectively bargained employees. I'm assuming this plan is allowed by the CBA, because I've been told in the past that you would have labor law problems if it isn't. A plan (or the disaggregated portion of a plan) that covers only collectively bargained employees automatically satisfies 410(b). A collectively bargained plan that automatically satisfies 410(b) is deemed to pass 401(a)(4), so no ADP test is needed. Note: For a plan that does not automatically satisfy 401(a)(4), the ADP test is how you show a 401(k) satisfies 401(a)(4), see 1.401(k)-1(a)(4)(iv). There is a similar rule for employee contributions and match. So, if I understand the situation correctly, the problem you have is that there were not supposed to be any ADP/ACP refunds this year because the plan automatically satisfied ADP/ACP. Those overpayments can be corrected under EPCRS.

I can see this describing either. It would be nice to see the document language. It also seems odd to use the allocation group definition to implement a freeze.

Mike, would you see a problem with it if the "certain date" was x years before the valuation date? I'm thinking of something like group 6 is those hired within 4 years of the valuation date.

Yes. It was added to avoid the need for a corrective amendment if the safe harbor compensation definition didn't satisfy 414(s). At the time it was submitted to the IRS, some in the field were claiming you couldn't do an -11(g) amendment for a safe harbor 401(k).

I think we need more details before anyone can answer. What does the document say? What effect does the provision have? Under 1.410(a)-3(e)(1), this provision could be treated as imposing a service requirement. However, 1.410(a)-3(e)(2) example 6 says a plan can be frozen so that there are no new entrants without violating the age and service rules.

Before you start on a correction, I would suggest taking another look at the plan document to see if it addresses your situation. The base document for our PPA VS document has the following:

The "solo 401(k)" document very likely doesn't allow an entity with employees to use it. I would expect them to have to restate the document before they could adopt his plan. I agree with Bird that it would make more sense for the company to start a new plan and let him roll his balance into the new plan.

I don't think we are on the same page. The parent company plan can provide that one division is completely excluded from the plan and still be safe harbor. However, if the plan doesn't pass 410(b), there are other problems. Good luck and TGIF

I'm glad you are looking at the cites. 1.401(k)-3)(c)(6) deals with putting restrictions on deferrals of eligible NHCEs. You are asking about excluding them from the plan, so they would not be eligible employees. -3(c)(6) would prevent you from making that division eligible to defer, but putting a low or $0 limit on how much they can defer. But, that's not what we are discussing. -3(c)(1) that I quoted says that if you want to satisfy the safe harbor match requirement, it has to be made for all eligible NHCEs in the plan. So, if you allow the division to defer in the plan, but don't give them the SH contribution, you don't meet the SH requirements. If they are excluded from the plan, they are not eligible NHCEs.

No, both the 3% and the SH match have the same requirement. If you are thinking about the SH match for NHCEs who don't defer, they must be eligible for it, but their match under the SH formula is $0.

If the plan passes 410(b) with them excluded, you can do it. Within the same "plan" (as defined in 1.401(k)-1(b)(4)), a SH plan can't exclude any of the NHCEs from the SH contribution. See 1.401(k)-3(b) & (c).

1) NO! Deferrals don't stop being deferrals when the employer keeps the money. 2) NO! See 1). 3) Yes, it is a prohibited transaction. 4) Yes. The employer needs to correct the PT by depositing the deferrals plus lost income. An excise tax applies to the PT (Form 5330) unless the employer files under the DOL Voluntary Fiduciary Correction Program (VFCP).

Well, the regs say that all eligible employees are in the test. If Mom deferred $400, you can't exclude her. I don't think it's different just because she elected to defer $0. The Gold memo deals with "creative" plan design and employment practices. The thing helping the testing in your situation is Mom's deferral election, not the plan design or that she was rehired. I think it would be huge reach to apply the memo to a situation like what you describe. Besides, if the IRS wanted to do that, we would have heard about it by now. It's fairly common for small businesses to have the owner's kids, parents and/or spouse work part-time.

Are any of the ERISA law firms planning to provide a warranty on their documents? I would think that for most law firms, it would be a more palatable option than having another firm review their documents.

Were the HCE's deferrals done correctly based on the HCE's deferral election?

Investment options are not protected under 411(d)(6), see 1.411(d)-4 Q&A 1 (d)(7). So, the annuity can be removed as an option and liquidated after the merger. Before they get too far down that path, they need to look at the contract for the annuity. Some insurance products have restrictions that can prevent immediate liquidation of the investment. We've had a few cases where the merged insurance product had to be kept for 12 months after the merger before the contract allowed it to be liquidated.

A correction using a method in Appendix A or B of the EPCRS Rev. Proc. is deemed to be reasonable and appropriate. Other correction methods may also be reasonable and appropriate. [Rev. Proc. 2018-52 6.02(2)]. They are not required to use the brief exclusion method. But, keep in mind that there is a requirement in 6.02(3) that the correction method used must be applied consistently for the plan year. So, yes, they can do a more generous correction as long as it is applied consistently for the plan year.

There is no guidance on mergers or spin-offs of safe harbor 401(k)s. The best you can do is to apply a reasonable good faith interpretation of the safe harbor rules. If the safe harbor started in the PEO plan isn't in effect for a full 12 months, they lose the SH for the year under 1.401(k)-3(e)(4). 1.401(k)-1(d)(4) will force the balances in the PEO plan for actives to go to the new plan and some of the PEO plan provisions will be protected under 411(d)(6) for the PEO balances.

Optional forms of payment are protected benefits. However, if a DC plan meets the requirements in 1.411(d)-4 Q&A 2 (e), it can eliminate an optional form of payment. So, it may be possible to eliminate the current partial withdrawals and replace it with a new one.