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We have a governmental employer sponsoring a 401(a) plan that also has a MERP (tax advantaged plan under Code Section 105 (it may also be a VEBA). There are veterans (VA) employed who do not need health insurance from this employer. They would like to opt out of employer contributions to this MERP and have the employer contribute instead to their qualified 401(a) account as an "employer" contribution. What are the mechanics to do this, if possible? we can set up the 401(a) plan with separate employee allocations (and there is no IRS non-discrimination testing issues) but how do we go from MERP contribution to 401(a)? I have asked for the MERP document, but we do not have it yet. Any thoughts or experience from others would be helpful. Thanks!

Thank you for this!

That sounds reasonable thank you!

Can an ex spouse take a hardship withdrawal to buy out her ex husbands share of their primary residence home? thanks!

I am looking for the IRS requirement that the formula has to be stated in the plan document rather than just referenced? Here is an example below - Contributions under collective bargaining agreement, employment contract or equivalent arrangement. The Employer will make an Employer Contribution based on a collective bargaining agreement, employment agreement or equivalent arrangement as follows: [Note: Insert the appropriate contribution formula (and allocation formula, if applicable) from the collective bargaining agreement, employment agreement or equivalent arrangement. The formula must be definitely determinable. Alternatively, the Employer may attach an addendum incorporating the collective bargaining agreement, employment agreement or equivalent arrangement. ]

I am talking about writing the CBA formula, for example a 10% employer contribution, into the plan document, rather than just reference the CBA like you could in cycle 2 DC and cycle 1 403b. Is there any IRS guidance on this change?

Does anyone know if there is an IRS Revenue Procedure that requires cycle 3 DC plans and Cycle 2 403b plans to hard code the CBA language into the plan document? I know it is in the pre-approved document but trying to find a cite as to why it has to be. Appreciate any insight. Thanks!

Great information! Thank you both.

We have a plan with a plan year that ends 6/30. This year 6/30 is a Sunday. The contributions has a last day requirement. Would 6/28 Friday be the last day in this situation? This is the last pay date in June. Thanks for any help.

Let’s say company A is a related and participating employer in Plan X which is a safe harbor plan with the basic match formula. Company A is purchased mid 2024 in an asset sale so all employees will be terminated from Company A. They have a distributable event. If the buyer has their own 401k plan that is not safe harbor, are there any spin off options mid year for that portion of Company X plan that is attributable to employees of A? Do we have safe harbor concerns where we should suggest a spin off as of end of plan year in order to not violate 2024 safe harbor status. Thank you for any comments!

I have a question in the M&A context - company B will be purchased by company A on 5/1. Company B has a non-safe harbor 401k plan and company A has a safe harbor plan. What are the options mid-year - can the non-safe harbor plan be merged mid-year into the safe harbor plan? I would think best practice is to use the IRC 410(b)(6) transition period at least through end of the 2024 plan year and then merge at end of plan year? Or freeze plan B, allow employees to join plan A and merge at plan year end. Any thoughts?

That is a concern. As a practical matter, what are practitioners doing? It seems this would be coming up alot now with all the M&A activity.

Does anyone agree with my last comment - that it is ok to cease participation in a safe harbor plan mid year? Thank you!

The 401(k) regulations - 1.401(k)-1(d)(6) Example 2 - do allow a PE to cease participation in a 401k plan. But they are silent about a safe harbor plan.

We are looking for other easier options than a spin -off. This would be a change of ownership scenario. Let's assume buyer does not want to accept a spin-off and the agreement is the PE will cease participation in the safe harbor plan before the purchase. Is this ok? Will the safe harbor plan, which is maintained by the current parent company, maintain safe harbor status for 2024? This is the question.

I am narrowing my prior question. If a subsidiary/Participating Employer (PE) is participating in a single employer safe harbor plan via a participation agreement and the company is purchased mid-year in a Code Section 410(b)(6) transaction, what are there options to leave the safe harbor plan mid-year? Assume the buyer does not sponsor a safe harbor plan. I think one options is to spin out into their own mirror safe harbor plan, and this will keep safe harbor status for the PE and the former parent plan. Is there another option - such as can the PE cease participation in the safe harbor plan before the sale and allow a distributable event without the plan losing safe harbor status? Appreciate any comments!

I have a safe harbor 401k plan using the safe harbor basic match formula. This plan has a few related employers (subsidiaries) that are participating via Participation Agreements. It appears that a couple of these employers will be sold mid-year, via a stock sale/change in ownership rather than an asset sale. My understanding is that this will create safe harbor problems and the only way to maintain safe harbor status for the plan is for each entity to spin out into its own mirror safe harbor plan. If correct and assuming we do not want to create new plans, would an option be to terminate/suspend the safe harbor mid year and convert to ADP/ACP testing - the plan is to continue the same match as a non-safe harbor match. The reasoning is that is will be easier to remove the participating employers. And as FYI - based on our projected testing, the plan will pass ADP and ACP anyways. Any thoughts? Thank y ou!

Thank you!

What is the correction method for an operational failure to exclude rollovers when applying the $5000 involuntary cashout distribution rule in a plan to termed participants? The plan has operated since 2018 as if rollovers were included. Do we go back to each prior plan year and look at the small accounts that should have been cashed out and cash them out now in 2024 even though the vested balance could now exceed $5000. Thank you for your thoughts.

Thank you very much! Our document just cites the regulations so that is why I was unclear.

I need clarification please on the rules related to unforeseeable emergencies under eligible 457(b) governmental plans. What are the requirements for exhausting all plan distributions and loans first? I've read Reg. 1.457-6(c) (ii) " distribution on account of unforeseeable emergency may not be made to the extent that such emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship, or by cessation of deferrals under the plan." I believe the plan document can require a cessation of deferrals, but the language is not specific concerning a requirement to take a loan first and exhaust other available money sources in the plan such as rollover money or age 59 1/2 funds if applicable. Is this an option that a plan document could require, or is it basically required under the 457 regulations, or can it be an administrative requirement of the recordkeeper? Thank you for any comments!

Thank you Luke!

Hi Ilene, I am totally aware of the anti-cutback rules, yes they are complex!! With this post I was wanting to clarify what option I had with those under 3 years of service, since I want to know every nuance. I think I am good there. We have presented the options of the best of both worlds to the client - 2 blended vesting schedules to elect one for the entire plan population post-merger, and they have declined because they want to keep surviving plan at the 5 year graded schedule. So for this merging plan, they want to keep those employees at the 4 year graded for old and new monies. Actually we will grandfather existing accounts as of the merger and new hires will be on the 5 year schedule for entire plan population I do not see an anti-cutback issue here. I will check into the 401(a)(4) implications if any but I think ok in this merger situation. Thank you! Relius Vesting and cut back article.pdf Change in Plan Vesting Schedules _ Internal Revenue Service.pdf

Thank you! Could the plan state that the 4 year vesting schedule in Plan A will continue to apply in Plan B for old monies and new monies after the merger? I do not see a cutback in vesting. The other participants in Plan B after the merger will remain on their 5 year graded schedule. I admit there are recordkeeping challenges as with transfers and rehires.

They are tax exempt entities, so the acquisition is like a stock purchase, where you have 80% or more Board control. They were acquired I think earlier this year, so they have the transition period for coverage testing. Just want to make sure on the new vesting I am ok to use 5 year graded for new monies for the group with less than 3 years of service.