Below Ground

Just to add 2 cents, I find myself dealing with this question quite often. I believe that the position stated by CuseFan makes a great deal of sense. Since an asset sale has participants making elections to take or rollover balances, while a stock purchase does not allow for that mechanism, there is clearly an important difference between the two classifications. As I understand, with an asset purchase, the "old firm B" is said to continue to exist, but without the employees, clients and assets it previously had. Employee actual terminate service from that firm and work for the acquiring firm. Conversely, a stock purchase has the entire firm transferred to new ownership, and in effect, there is no service termination or dissolution of "old firm B". Just a transfer of ownership. This is analogous to a simple shift in ownership between the previous owners. Using this logic, an asset sale represents participants going to work for a new employer, therefore, ownership of the old firm B is not relevant. Conversely, the stock acquisition has old firm B still in effect, so ownership of that firm would be used for determinations. Anyway, that's my 2 cents.

No plan document means no plan in existence.

Is the purchase an asset or stock purchase? One require the buyer to assume the Plan, the other makes it optional.

You say they put money in separate from the contribution. What does that mean? Is it just another deposit? Monies contributed to pay expenses are a portion of the employer contribution, and must be allocated as such. Are you exceeding the maximum deduction or 415 limits?

You should be fine since the amendment is basically limiting benefits that is not discriminatory, and you are not allowing for improper administrative discretion (this limit would automatically apply given the Top Heavy Status). Also, you are not modifying the language of the document by changing the stated language of the options themselves. You are customizing in a manner that is permissible in form. Unfortunately, I suspect that without an individual letter of determination on the document, 100% certainty can't be assumed. With that in mind, IMHO you will be fine.

Not to jump on the bandwagon, but with respect to the Plan I don't see why the Client's attorney would say the IRS needs to be notified.Perhaps he/she is referring to change of name on 5500? I note that my understanding is that the way plans are tracked via 5500 are the Employer TIN and the plan number, so I don't see any issue here at all.

I would say 002 for a couple of reasons. First, a spin-off results in a new plan. Second, if you use 001 and use the 86 effective date, you will certainly need to explain at minimum what happened since your last filing of 001. Didn't that Plan "go away" after the merger with the MEP ADP Plan? 002 with a current effective date is cleaner and doesn't create questions about missing 5500 Forms, IMHO.

I assume you applied 100% of the refund to deferrals (Roth or Pre-Tax), since excess applied to Matching would not be distributed, but forfeited. (The order should be in your document.) In addition to what others have said, make sure Matching doesn't use the excess deferral distributed.

Oh. I understand now. Errors like this do tend to come in groups.

David Rigby, not understanding your response. I may be dense.

I have had experience with this exact situation under an IRS Audit. We had sent a letter to the ex-participant about the excess. The person ignored that letter, so no money came back. The amount was then "reconciled" into the next years profit sharing contribution. The auditor said "good" and moved on. There was no further comment, including with the supervisory review. I suspect it would have been fine if no action was taken, but why not take the safe route? It worked in that situation, and yes I know a single IRS audit does not prove anything definitively, it took almost no effort for that extra CYA, so why not?

Piling on I would say 2019 for all of the issues listed. I don't think this could be a restatement of the MEP given the original post, but maybe I missed something. BTW, the recommended way to withdrawal from a MEP as an Adopting Employer is to establish a new plan into which balances are rolled, then terminate that plan if the intention was to have no plan going forward. I do quite a few MEPs and I do NOT use that approach, but I mention it since it says establish a new plan, meaning 2019 is your effective date.

IMHO 401_noob is correct about the amount being so small it can simply be ignore, which makes bullet point #3 a viable option. However, I would start with bullet point #2, by sending a letter to the person. Then, let the amount be "absorbed" in a future employer contribution to make the Plan whole. If you get the $18 back, you reimburse the firm; otherwise, don't lose any sleep. I would take this approach since it documents that an attempt to retrieve the money was made, notice was provided to the person, and the Plan was made whole. Then if your get a really crazy auditor everything is covered and the effort expended was minimal; including the effort needed in the audit.

Assuming I am reading your question right, the fact that the firms are not service organizations rules out ASG. Mike being an employee has no impact.

I have found that reconciling annual limits to values computed with per-payroll pay to be somewhat problematic, especially if the Plan defines the basis to be the payroll period. Better to fund on a periodic basis with actual allocation based upon the annual basis. Does that mean you won't have situations where monies needs to "forfeited"? No. As you point out, a dollar cap doesn't give a perfect solution, but it typically works for many, if not most, plans.

Must be eligible for a nonelective contribution of some form under the Plan.

We have a notice sent to the person at termination, not because it is required, but because it reduces problems.

Best way to deal with this issue is to have the maximum match defined for the year applied as a cap to YTD matching. Most payroll systems can do this, since they just need to keep a running total of YTD match. Then, the period match is the lesser of your formula applied to payroll period pay/deferral versus the cap minus YTD match.

Thanks. Greatly appreciated.

If that 6/30 sale of the business was an asset sale, would that not qualify as "the plan’s termination is in connection with certain business transactions described in Code section 410(b)(6)(C) (e.g., change in employer’s related group)?

I am having some trouble with the "the plan’s termination is in connection with certain business transactions described in Code section 410(b)(6)(C) (e.g., change in employer’s related group)". Specifically, if the firm is sold in an "asset sale" does that qualify as a change in the employer's related group?

But of course! After the Client signs some big service agreement with lots of fine print.

One of the newest marketing techniques I am running into is where an "independent expert" come in and says to the firm's controller that by signing Form 5500 for the firm you are exposing yourself to a personal liability, including making yourself a fiduciary. I note that the Plan document does include language that fully indemnifies any individual acting as an agent for it, the Plan Sponsor. Anyone have any comments on this practice?

Found it!

How do you do this?