30Rock

Thank you all. I am following what you are saying. I will get in touch with the client and try to find the APA and other legal documents, or push to have their M&A attorney review and advise us. Thanks again!

Thank you Artie. Here are some additional facts - the buyer bought the company's assets correct. However, the buyer then hires all the employees of seller and creates a new subidiary company as the employer of these sold employees, similar name but new EIN. This subsidiary has not yet adopted the buyers 401k plan - by the way both plans are safe harbor. So as of yesterday our plan was to do as you are saying and unwind all the contributions in sellers plan and have new company adopt buyers plan. But today, I learn they (the buyer) have a "TSA" in place with prior company until end of 2026. I am not clear on what the TSA allow for. I guess the sold employees are still under sellers payroll. So, can the sold employees stay in the sellers 401k and continue to contribute and receive match thru end of 2026, then become participants in buyers plan 1/1/27? Seller can then terminate sellers plan. This would be the ideal outcome. Thoughts? BTW - this is small plan market - approx. $7MM total 401k assets.

Thank you Peter!

I have a question to present as there is no clear answer in EPCRS. There was an asset sale in April (4/2/26) and the employees were hired/transferred to the newly formed company with new EIN of the buyer. I have finally received confirmation by legal counsel that the buyer did not agree to take over the sellers 401k plan after the sale. However, the newly formed company continued to contribute to the plan of the seller after the sale closed - deferrals and match. What is the correction here? Distribute deferrals to the employees as 1099 income for 2026, but what about the match? Normally under EPCRS excess amounts attributable to match would be forfeited but the match was funded by an ineligible employer since there was an asset sale. Following that line of correction, the match would be forfeited, the plan terminated by the seller, and then there will be forfeitures to deal with. So after any plan expenses, lets say that forfeitures remain. Do they get reallocated - Ineligible match contributed after the 4/2 asset sale by an ineligible employer gets reallocated to the participants? Or, could this be viewed as a mistake of fact and return the match to the buyer? I have not had this come up before, can one of you M&A experts chime in maybe? Thank you !!

Why would they be excluded - I meant the plan could be subject to 410b testing if there is an HCE in the lower group then you have to do coverage testing. You even said above that "410b is always invoked..."

So if part time never complete 1000 hours to earn the one year, it requires 410b coverage, just as if they do not earn one year under elapsed time? Is this what you are saying? THanks!

I would appreciate help from the TPA compliance experts here! If a 401k ERISA plan is drafted to have a 12 month elapsed time eligibilitity for matching contributions for full time employees and a One Year of Service under the hours method for match for part time employees, does this invoke 410(b) coverage testing? Thank you!

I am not sure if you can true up for part of the year and then revert back to payroll. I think the IRS Notice says you switch to annual based match for the year if you want a retro increase.

Hello - just wanted some clarification on this issue. A current safe harbor plan provides for an enhanced safe harbor match of 4% and use a payroll computation period. Sponsor wants to increase it this year to 5%. What are the mid year requirements - 30 day notice, the increase must be retroactive to 1/1/26, can the plan do a true up match retro to 1/1 and then continue with the payroll match going forward, or does the match computation period have to change to annual for the remainder of the 2026 plan year? I appreciate your thoughts!

Looking for guidance. We have a spin off plan effective 4/1/26 with the EACA mandate. The prior RK drafted the EACA to use the first day of the following Plan Year as the date of the first increase. New RK can only use the initial period - 2nd plan year. My question is how to administer for the employees auto enrolled in 2026. Can the new intial period be applied for any of the 2026 auto enrolled participants? 4/1, or could it be retro to employees hired on or after 1/1/26 as long as they get an upddated advanced notice letting them know the first increase will not occur until 1/1/28? I know the conservative approach is to apply the change 1/1/27 in the plan document. Thanks for your help!

We have an asset sale and a SIMPLE IRA exists. As of the sale, the employees are technically terminated and then may transfer to the buyer. What are the options for the SIMPLE IRA assuming buyer does not want to set up a SH 401k plan - option 1 the SIMPLE IRA stays with the seller and essentially terminates since employees are terminating and there will be no payroll contributions, option 2 the buyer could take over the SIMPLE IRA during 2026? The problem with option 2 is that I do not see how the new buyer can amend the form 5305 or 5304 mid year - no room for a successor employer on the form. Is this a matter of a Board resolution or asking the IRA custodian to recommend the process? Thank you!

I think something like that would be needed. I recently found this prior discussion on this board.

Safe harbor plan fails compensation ratio test for the match since bonuses are excluded. The plan document does not provide any type of correction method such as use total compensation. Does an 11(g) amendment correct this situation where compensation would be added back? I remember hearing in the past that if a safe harbor plan fails compensation tests it blows the safe harbor, unless the base document has a correction like the AQSC document does. This plan uses a pre-approved document but no correction language has been located. How do we proceed? Thanks!

Safe harbor 401k plan has a prior inactive discretionary match. For 2026 they are removing the safe harbor match and reinstating the discretionary match. Can the plan document use prior year testing under the first plan year method in order to assume 3% for NHCE’s for purposes of the ACP test? I was thinking no since there has previously been a discretionary match and adding it back does create a first plan year. But as always I appreciate your feedback!

Yes I agree thanks!