Draper55

We know we can retroactively adopt plans and we can also retroactively improve benefits. However, if a controlled group member wanted to retroactively join the existing plan of a related controlled group member would this fall under one of the two scenarios(i.e., IRC 401(b)(2) or (b)(3)?

Could a plan sponsored by a sole proprietorship be amended to include a partnership for the prior plan year if the partnership adopts the plan before the tax filing due date?

Looking back at the reg I think it could be considered a timing of plan amendments issue more than a BRF issue. There is an existing NHCE and two HCEs including the prospective participant. Future NHCES could be hurt if they cannot earn the same benefits due to a delayed entry so I suppose it could be construed as discriminatory depending perhaps on how much time has elapsed since the entry restrictions were liberalized to allow the family member to join earlier. Thank you for your insights...

What are the issues if plan eligibility requirements are liberalized to accommodate a family member and then switched back at a later point in time?

If a plan terminates late in a calendar year and there is overfunding and the goal is to transfer 25% to a QRP and revert the balance to the employer, must everything occur in the same taxable year? Can the transfer and/or the reversion be spread across 2024 and 2025? Could the required 25% be spread across two years?..would this create two seven year clocks? Could the reversion be spread across the two years? A little simpler, can the transfer happen entirely in 2024 and the reversion entirely in 2025?

Thanks for the comments. My preference is to not rescind the termination due to potential legalities and me not wanting to practice law as a non attorney. However, they will have to wait 12 months I believe to put in a replacement plan. This causes some difficulty with a delay in doing a 4980 transfer from the terminated defined befit plan. While the 100% vesting could remain, as RBG points out, the opportunity to distribute say safe harbor contributions on other than a hardship distribution is lost and this could not be brought back if the plan were ongoing. I had anticipated QNECs to cover the lost deferral opportunity and the missed safe harbor contributions retroactive to the date of plan termination.

If a plan sponsor wants to undo a plan termination, is the 100% vesting that was stated in the resolution to terminate also reversible? The resolution is not a plan amendment and hence the plan document has not been modified. I am thinking that if the termination resolution stated that all benefits were vested as of the termination date and subsequently a resolution is executed to nullify the plan termination the 100% vesting could be reversed as well. The plan vesting schedule was never amended. I would think certainly benefits accrued after the termination date could be subject to the vesting schedule going forward. Any thoughts on this?

Try calling Andy Powell at 727-488-3338;he is a Florida attorney who is familiar with these transactions...

Does the assumed 3% missed deferral apply to both HCEs and NHCEs in a 3% nonelective safe harbor 401(k) plan. I believe it does so that for the period of exclusion the HCE would get .5*3%=1.5% QNEC but of course not receive the 3% safe harbor contribution since not an NHCE.

I believe so but you must back the QNEC for the missed deferral out of the otherwise applicable plan or 402(g) limit for the year..

The ability to take loans as needed in addition to the potential additional creditor protection could justify the maintenance. Further, the ability to make a wider array of investments subject to the trust agreement could also be a motivating force.

John...do you think it is a brother sister controlled group?...I am not sure why it would not be; 80% control of both entities and a controlling interest of both entities when considering identical ownership..

An individual is a sole proprietor and also is a partner in a partnership with 51% ownership and one other partner at 49%. I think this is a brother sister controlled group. Does this mean that the minority partner must be covered in the defined benefit plan of the sole proprietor to satisfy the 2 participant floor of 401(a)(26) considering the controlled group? If so, could a solution be for the spouse to become a W-2 employee of the sole proprietor and then cover the spouse to satisfy 401(a)(26)?

If an individual has two plans, a 401(k) and a defined benefit plan, and the defined benefit plan exceeds $250,000 in assets, but the 401(k) has not been funded, is it required to file a Form 5500-EZ for the 401(k) showing one participant and $0 in assets?

Client directs me earlier this year to terminate their cash balance and safe harbor(3% nonelective) 401(K) plan due to a business decline. Appropriate resolutions,notices etc. were done. Subsequently, business improves, and they decide to still have a 401(k) plan and only proceed to terminate the cash balance plan. Small business 401(k) with owner and about 10 employees. No deferrals were made prior to the 401k plan termination. Wondering if anyone has done a 401k pan termination/nullification and what are the issues..Perhaps it is best to just proceed with the termination and start a new 401(k) in 2025; however, the successor plan rules could be an issue. If we restart the terminated plan, I am thinking the HCEs should not defer anything for 2024 and hence not require the safe harbor to satisfy the ADP. It would then be up to the sponsor to decide whether to give say 3% to the employees for the entire year or not since it would not really be a safe harbor plan for 2024..Any thoughts?