30Rock

Yes I agree thanks!

The plan sponsor is trying to be more restrictive and does not like the service spanning of elapsed time. But I do not think passage of time will help, and in fact is more lenient if the period of severance exceeds 12 months. Example - If plan has 6 month eligibility, with passage of time, you still include the months he was gone. So even if he comes back within 12 months, all the time since hire date are counted? Hired on 11/6/25, work 2 months, quit on 1/6/26, rehired on 6/7/26. He is immediately eligible and you do span the time he was gone, but it is easier since you just look at the calendar and add 6 months to the date of hire and there is no computation needed as to whether there was a 12 month period of severance. Thoughts?

Great thank you!

Does anyone know what the following means in the PPD document - plan elects a 6 month eligibility (not consecutive and no hours required), elapsed time is not marked but actual hours is marked. The adoption agreement notes that this is passage of time and not elapsed time and no minimum hours of service is required. My question is do you still have to apply the 1000 hour in a 12 month period failsafe? How would any break in service provision work? Thanks!

If the error is found after the deadline and corrected and the notice is provided, is the QNEC 25% or 50% for terminated after SECURE 2.0?

It seems to me the IRS Fix It Guide is not picking up the changes in IRS Notice 2024-2 the Grab Bag. The Fix It Guide states the 50% QNEC applies to terminated employees even if the error is found within 9 1/2 months. I think that is the old rule. Thanks!

True - they could always subpoena the plan.

What are the options for adding a student loan match now in 2025 to a non-safe harbor calendar year plan? The plan has a payroll period based match. Would the student loan match have to start mid year for example 5/1/25 in order to be payroll based, even though it can be funded annually after 2025. I am thinking if they want to make the student loan match retroactive to 1/1/25 they would need to amend the match formula for all participants - regular deferrals and student loan repayments - to be an annual match and look at compensation and deferrals retro to 1/1/25. IRS Notice 2024-63 indicates the match has to be at the same rate. Thoughts?

That is awesome. I figured it would come down to case law interpretation. I do not have all the details on this former employee but I will convey this information to the plan administrator to discuss with his legal counsel. Thank you very much!

I think what is happening is that litigators are using AI to seek participants in a plan who maybe were the subject of excessive fees - investments, recordkeeping. And this former participant responded to this litigator inquiry and now the plan administrator is questioning what to supply. I could see providing documents if the former participant had an actual claim for benefits and wanted to see the appeals procedure in the SPD. I think in this situation, the law firm is hunting for a plan to sue. Not that it applies in this situation, but does the ERISA statute of limitations of 6 years come into play?

I have a plan sponsor who received a request for plan documents for the attorney (looking for plan mis-management) on behalf of a former participant - she was paid out in 2022 and has no account balance. Is a sponsor required to provide plan documents for the period of time the former participant was in the plan - for example documents covering 2019-2022 plan years when they were an active participant? In my reading of ERISA and DOL regulations I only see references to "participant" or beneficiary, which I interpret to mean an individual with an account balance. Thank you. ERISA 104(b)(4) (4) The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary, plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated. The administrator may make a reasonable charge to cover the cost of furnishing such complete copies. The Secretary may by regulation prescribe the maximum amount which will constitute a reasonable charge under the preceding sentence. DOL Reg. 2510.3-3(d) - (ii) An individual is not a participant covered under an employee pension plan or a beneficiary receiving benefits under an employee pension plan if- (A) The entire benefit rights of the individual- (1) Are fully guaranteed by an insurance company, insurance service or insurance organization licensed to do business in a State, and are legally enforceable by the sole choice of the individual against the insurance company, insurance service or insurance organization; and (2) A contract, policy or certificate describing the benefits to which the individual is entitled under the plan has been issued to the individual; or (B) The individual has received from the plan a lump-sum distribution or a series of distributions of cash or other property which represents the balance of his or her credit under the plan.

Yes makes sense. Thank you all!

This is a reply to EBECatty post - I looked for that option but it appears the Seller is a holding company that does not sponsor a plan. And then there is another company I guess its subsidiary that is part of the sale, and they sponsor the plan. And there appears to be a parent company that owns the Seller (holding company) that must be the one with the other plan. The way I have seen this sale of subsidiary work is when the subsidiary was a participating employer in the plan. Then, upon sale, it is treated kind of like a plan termination and the employees all have a distributable event. But the plan itself is not terminating so the successor plan rule does not come into play. I guess it is possible to restate the plan and have the overall parent become plan sponsor, and this subsidiary adopt the plan as a participating employer? In response to P - You are aware of the successor plan issue correct? So you are saying we can terminate a 401k plan even though another one is in the controlled group before the sale. Then after the sale, there will still be a successor plan because the buyer also has a 401k plan. So I am not sure how we have a distributable event here either before or after the sale?

stock sale - they wanted to term the plan before the sale. But we found out about other plans - the plan document did not state yes on is this a controlled group question.

That could be another approach. And if they do not consent there is no repercussion but what if they want to return it to the plan since they did not consent? I am just looking for the one-off instance that could happen.

I agree with what you are saying - 1. I do not feel comfortable about the retro amendment because I cannot state for sure no one was treated less favorably, and 2. I was also considering the overpayment corrections which still allow attempts to recoup however if the participant does return the funds, we likely will turn around and cash-out them out on the next cash-out/sweep especially since the cash-out threshold is now $7,000. But, since they normally do not return the overpayment, at least the fiduciary would be on record of making the attempt to recoup and correct the failures. And, under SECURE 2.0 you no longer have to attempt to recoup, so the plan sponsor could document this as a self-correction under the overpayment provisions of SECURE 2.0. Any thoughts?

Looking for some thoughts on this situation. Buyer company A is seeking to buy target company B. Company B is owned by a larger company and there are more than 2 401k plans in this controlled group. Buyer company A sponsors a safe harbor plan and Target company B sponsors a safe harbor plan. Buyer A does not want to take over this plan they want it terminated before the sale, and then have participants roll over their balance to company plan A. Are there any options to terminate Company B safe harbor plan? The problem I see is that Seller B is part of a controlled group, and the successor alternative plan comes into play - if seller B terminates the plan, the termination is not a distributable event since there is another 401k in that controlled group. If they do not terminate the plan before the sale, and Buyer A takes over the plan, the successor 401k plan rule still comes into plan and if Buyer A terminates the plan it is not a distributable event. I see no clear guidance where you can merge a terminated safe harbor mid-year into another safe harbor plan (maybe this is ok?), or that you can distribute assets in a terminated safe harbor plan if there is a successor plan. Any thoughts?

Yes, it appears letter to participants was issued with the 402(f) notice. I think we are trying to determine if we can retroactively amend the plan back to 2015 to match plan operations. However, this type of retroactive amendment does not clearly fall into an EIF and the "not less than favorable rule" under SECURE 2.0 and IRS Notice 2023-43. Then there is always the option to just fix it prospectively. Apparently 6 participants were affected by the incorrect cash-out.

Thank you that is helpful.

What is the correction if a plan uses a $1,000 cash-out threshold but the plan in operation has been involuntarily cashing out participants with account balances between $1-$5,000? And yes an IRA agreement was in place, however the plan document was not amended to permit these mandatory cash-outs/rollovers. It appears to have been going on for several years and has not been identified as an inadvertent failure. Thank you!

Maybe the plan document should be amended to require a year of service for adjuncts for match eligibility and then test them as otherwise excludable? From what I understand, this private university uses on calll/Per diem as needed types of instructors. They do have full time professors, and of course they receive the match. But if any of these professors change to adjunct, they remain match eligible - once in always in. Thoughts?

No, they have never worked 1000 and if they do they would give them the match. That is a good idea, and I need to look at the testing from last year. The match has no eligibility requirements, but you can still use OEE right? Thank you!

M&A Question - What if the employer is purchased and the buyer has a safe harbor 401k and a 403b for the non-profit group. I Assume this will not permit the mid year termination but if the SIMPLE terms on 12/31 will rollovers be allowed in the 2 year period since there is an existing 401k/b with the buyer? Or does it mean an actual new 401k plan has to be established by the employer? Thanks!

It looks like that is the drawback - they can rollover but will be subject to the distribution restrictions so they have no access to it until age 59 1/2 generally. Makes no sense to me to do the rollover, I think it would have to go into the pre tax source in the plan right?

Agree. What about under 332(b) of SEUCRE the 2-year rollover rule - is it waived due to the termination of the SIMPLE IRA on 12/31 and the fact that the new owner has a 401k plan? SECURE implies the employer has to "establish" a 401k but what if it is a buyer and they already have a 401k or 403b? Thank you!