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@Larry Starr If all it took was being a separate employer in a plan to allow for distributions upon discontinuance, MEPs wouldn't have to go through the exercise of spinning off employers into single employer plans to then terminate them every time an employer ceased participation in the MEP. I'm not aware of a partial plan termination - in and of itself - being enough to allow distributions. Nor am I aware of an exception to that where a possible partial plan term is caused by the discontinued participation of an employer. Hence my question / hope that there was some exception or rule that WOULD allow distributions to those affected employees. More typically I see a partial plan termination occur because a number of employees have a severance event. They are then typically eligible for distributions because they are terminated. Not because they are 100% vested or because there was a plan termination. In my fact pattern - the employees are still employed. By the same employer as before.

Thank you, that's the confirmation I was looking for. I was wondering if my memory was correct or if something had changed. Usually the documents I see have a mandatory spinoff in which case it is easy to formally terminate the plan and distribute. This document does not have such a provision. And I've been in this industry long enough to see the laws change many times on most everything, so I figured I should ask before I assumed these rules were the same as when I learned them at the start of my career. If anyone else has some other insight that differs from my and Luke's understanding, please share. @Larry Starr? @Kevin C?

No, it doesn't quite answer my question. Neither company has a problem with the 100% vesting, I should have mentioned that in my original post. My question is - what is the distributable event for the Employees of Company B? They are still employed. What support does Company A have to allow distributions for Company B employees? I think the example I am relating it to is a company that has a plan that covers several different divisions of employees, but not divisions. If an employee switches divisions, or alternatively the plan is amended to no longer allow a particular division's employees to participate, I don't recall any way for those participants to take a distribution (unless otherwise eligible for an in-service withdrawal). Is this somehow different because it is a separate employer? Company B will not be part of the control group as of 1/1/2020

A two company control group is ending as of 12/31/2019. Both participate in a 401(k) plan together. The main sponsor would like to kick out the participating ER at the end of the year. The Participating ER will likely voluntarily end it's participation in the plan anyhow. They aren't ready to have a new plan of their own. The plan document (yes I read it) is silent on this exact scenario. The participating ER MAY choose to set up a successor /spin off plan. But nothing in the document says they have to. I think the old rule was, the discontinuance of an ER doesn't necessarily create a partial plan termination or distributeable event because the employee's haven't terminated employment. But I thought there was a narrow circumstance where it could be considered a partial plan term and distributable? Am I imagining this possibility? Anyone know the rules? Point me in the right direction?

I don't think so. This is an outdated example, but the best I can think of off the top of my head. If a sponsor has more than one plan (such as a money purchase plan) and a profit sharing plan, the participant's vested balance in both is used in determining the maximum loan amount available. But only one plan might actually allow for loans. If only the profit sharing plan allows for loans, then obviously the participant can't take a loan from Money Purchase dollars. I don't see how this is different from restricting sources within a single plan.

I'm not aware of a regulation. I think that comes down to a contractual issue. Can a custodian hold the plan assets hostage when there are unpaid invoices and trustee direction to move the assets? Probably No. Can a custodian / recordkeeper say in their contract that if there are unpaid invoices, and a liquidation / asset transfer request is received, they will first pull the fee amounts before completing the asset transfer? Yes. I have see recordkeepers do this, and it is so specified in their contracts and fee disclosures ahead of time.

Thank you Doghouse and Lou S. Especially the EOB cite. I knew there was something out there on point, but just couldn't put my finger on it.

A sponsor wants to amend their plan to require employees who defer to defer at least 4%. Employees cannot elect a lower percentage unless it is zero. Other than needing to be tested under 401(a)(4) - how would we even do this? Is this permissible? It seems like it would flagrantly disfavor NHCE. Complicating matters is the plan presently has a Safe Harbor match, and plans to keep it for the foreseeable future. Thoughts?

They could consult with an attorney who might be willing to help them disqualify / unwind the plan. Also, were the participants offerred the ability to make deferrals in 2018? If no, EPCRS says the ADP test is run without those participants in the test. In which case the HCE would be the only ones in the ADP test and it would pass. Still doesn't solve the TH issue, and then you would have the Missed Opportunity to Defer correction to deal with, but just something to consider.

I would just clarify - that "QRP" might stand for Qualified Retirement Plan, instead of Qualified Replacement Plan. So not necessarily anything to do with a DB plan that is closing. The promoter might be using QRP as a more general term to distinguish a more comprehensive plan from it's "solo 401(k)" product. I, like a number of folks on these boards dislike the terms "solo 401(k)" "uni-k" etc They are marketing terms that often confuse at best, or mis-lead at worst, and routinely create compliance issues.

I'm not sure I understand. The auto defer / auto escalate almost always go hand in hand. If a participant is subject to one, they are subject to both. When plans implement these provisions for the first time they have to decide who it applies to. 1. New hires only 2. Current eligible employees who have never made a deferral election (this might be zero based on your description, but I find most larger companies there are at least a FEW who didn't opt out or in) 3. Current eligible employees who have never made a deferral election, or ones whose current deferral election is 0% 4. Current eligible employees who have never made a deferral election, or ones whose current deferral election is less than the starting auto enroll - in this case 1% Which of the above will apply to your plan? Only scenario 4 would require any sort of analysis. 1% is pretty low, is there a baseline paycheck you can examine to calculate the % for those that are deferring flat amounts? Moving forward - the auto escalation applies to folks who you auto-enrolled. If you never autoenrolled them, then their election stays as whatever they elected. Even if it would end up being less than what they would be at under the escalation. Very rarely (but it does happen) do I see the auto escalation bifurcated from the auto enrollment, and each provision is applied separately. You'll have to read your plan document to see if that is the case.

Eh, I would say §411 is pretty clear everyone's rights are non-forfeitable upon plan termination, regardless of what the plan document says ( but the document should agree with the regs) https://www.law.cornell.edu/uscode/text/26/411# https://www.irs.gov/retirement-plans/terminating-a-retirement-plan https://www.irs.gov/retirement-plans/retirement-plan-faqs-regarding-partial-plan-termination

I do think you are correct about the forfeitures. A QACA SH subject to vesting will allow some forfeitures to occur, and those can be used in future years towards new safe harbor contributions. I don't see how having fewer participants deferring or not will impact that. If the QACA was structured as a match, yes, it might be more expensive due to increase participant from automatic enrollment (but also create more forfeitures), But CPS mentions a QACA 3% nonelective. So the traditional 3% SH nec will be the same as a QACA 3% nec (absent forfeiture available to reduce). It isn't impacted by how many defer.

It may be helpful to know that MT's uncashed check literature only mentions account balances under $5,000 unless the plan is terminating. And it makes zero mention of Roth. I suppose I don't actually know what MT does with Roth account balances when part of a force out distribution. I too am concerned about Voya setting policy for the plans.

After receiving the TPA notification I had asked some follow-up questions, and it was in response to those questions that the rest was explained in an email. I don't know that they will provide that additional information unless asked. So I encourage all of you to ask. I have not seen any issues with MT or Penchecks when used by other sponsors, so I don't think the issue is them. There was zero mention of a taxable savings account in the clarification I received (whereas Penchecks is usually happy to explain that option when asked about uncashed check services). Unless the sponsor opts out, the communication from Voya made it clear uncashed checks would be going to an IRA. The e-mail response I received even mentions that if the money is an excess contribution to the IRA, the customer is subject to a 6% penalty each year it remains in the IRA. So they clearly know this will create issues for the participants. I imagine this particular possibility is the reason Penchecks has their taxable savings account option. My concerns are two fold - 1. Will this create issues for the plans / sponsors, particularly in that the terms of the document are not followed (such as an affirmative election for a cash out that instead ends up in an IRA), and 2. What issues this may create for the participant. I just get the impression that this wasn't well thought out. For example - I asked about Roth IRAs (because some portion of the uncashed checks are Roth money), and the answer to that was the IRAs may record the money as pre tax or post tax, but that the IRAs themselves aren't recorded as pre tax or post tax. So it sounds like the Roth uncashed check money will go to a traditional IRA, but be recorded as post-tax money. Which for the record is not the same as going to a Roth IRA. Not to mention Roth 401(k) can't be rolled over to a traditional IRA, so it would count as an after-tax contribution to the IRA (and I presume lose it's status as Roth money).

Here is the initial communication, which doesn't say much. I suppose to be fair they are allowing sponsors to opt out of this approach. The additional clarification from XYZ went into more detail on the 1099-Rs, rollover treatment and IRA contribution treatment etc, which I outlined in my original post. "Dear TPA , We are writing to let you know that one or more of your Plan Sponsors will be receiving a letter from XYZ the week of November 11th regarding uncashed checks. This letter is to inform Plan Sponsors of action we will be taking on checks that have been outstanding for 365 days or more. Our plan is to transfer those funds to an outside company, to establish an IRA for the benefit of each respective individual. If a Plan Sponsor is in agreement with this process, no action is necessary. Alternatively, if they wish to provide more current participant addresses, they may complete the Notice of Direction (included with their letter) and return it to us no later than 60 days from the date of the notice. If the check remains uncashed after mailing to the updated address provided by the Plan Sponsor, XYZ will need direction from the Plan Sponsor how to process the check. If a Plan Sponsor’s plan document allows for disposition of such assets to the plan’s existing Forfeiture or Trustee-level Account, the Sponsor may use the Form provided with this email to direct XYZ accordingly. As a reminder, you may access our Uncashed Checks Report for your plans on XYZ Website within the “Reports” section. For a list of your impacted plans, please contact the XYZ Team. Please let us know if you have any questions. "

I hesitate to name the company because the last time I complained about a specific company there were some issues with my post. Nor do I want this to turn into a 'let's all bash XYZ custodian/ recordkeeper'. During the regular course of things I haven't encountered too many issues with this company. Just this particular misguided attempt to get uncashed checks off their books. As to how they are allowed to do this - I asked the same question, and asked them to provide citations. I have not heard back from my latest e-mail.

A financial company that shall remained unnamed has recently notified it's plan sponsors that it is changing how it handles uncashed distribution checks. Any checks uncashed after 365 days will have the money moved to an IRA. When we asked for clarification the response was that nothing from the tax reporting on the original distribution would be changed. Depending on the type of original distribution, the deposit into the IRA would either be considered a contribution, or a rollover. It would be up to the participant to make sure it was reflected correctly on their tax return, including amending prior returns if necessary. I can think of a whole host of ideas why this is a bad idea, and was wondering what other people think. The financial company is not making any distinction between under $5,000 force out distributions, affirmatively elected distributions, rollovers, cash outs to participants, Roth money, non Roth money etc. What if the amount exceeds the person's IRA contribution limit? I have not seen other companies handle uncashed checks this particular way before. But maybe there are others who do it the same way? Am I in the minority in thinking there are several other similar - but much better - ways to handle this?

Hi Peter, This is what I found. It is from the Estee Lauder case filed last month. Is the amount indexed? If not, it should still be $110. but I confess, I didn't actually read the CFR. "29 C.F.R. § 2575.502c-1 increases the penalty under ERISA § 502(c) to $110 per day"

I don't have many answers for you, but wanted to thank you for your thorough post. Often first time posters do not provide enough information and context for their question or concern. For anyone to actually be of help. I think you've provided enough information that someone who does work with SIMPLEs could help you, or at least ask some follow-up questions to try to help. I will say that offering a participant the ability to enroll, or make a change to their deferral is separate from the education meeting. Yes, usually one of the functions of the education meeting is to help with those, but there isn't any reason why you can't (you probably should) provide the enrollment and annual information earlier, as in November. And then if employees complete the forms and turn them into you, the updated elections can be implemented by 1/1. If the advisor's only role is to help the participant select their investment line up (and NOT help with enrollments) then a January meeting might be fine. Similarly with the notices - some advisors do take on the responsibility of passing out notices, but many don't. For small employers, usually the employer is in the best position to know how to reach employees, or have a last known address if hard copy notices are sent. I'm not aware of a fulltime requirement for SIMPLEs. If I recall, the requirement is $5,000 in the prior two years, and an expectation of at least $5,000 in the new year. So if you were hired in 2016, made over $5,000 in 2016 AND 2017, you'd be eligible to participate in the plan starting in 2018. That assumes your SIMPLE plan document ( do you have a copy? Maybe the IRS sample doc was used? Does the adviser have a copy?) doesn't provide for a more generous eligibility (such as immediate upon hire). Sounds like the advisor is in the investment only role, and not in the 'day to day administration' or 'ongoing annual operations' role. Either you / the employer will need to fill that role, or hire someone who will. Good luck.

You should check with your lawyer. Are the REITs part of a 401(k) plan? You should contact the plan administrator (whoever is listed in the summary plan description, might be the Ex's employer). and write out your request and ask these questions, including asking for an accounting by investment of the account segregation (where they split apart your portion and your ex's portion). I would also include the trustees on any written requests you sent to the plan as the trustees are required to keep track of the money. As for the financial advisor - well, unless they are a fiduciary, they may not have any legal say over the money or where to move investments. I would suggest working with someone who actually has the power to move money or make decisions for the plan, the plan administrator, or a trustee. Good luck!

I have never heard of one. We have filed amended returns years after the fact without issue.

Was the pre-existing money in Sponsor A's plan also sent to PEO plan? Or were only new contributions sent to the PEO plan, leaving the old money untouched? Has the Sponsor A plan been filing 5500s? Did they treat their plan terminated as of the payroll service change date? Forgive my skepticism I find it hard to believe there was no paperwork. Not even a blackout notice? I'm guessing there is some sort of paperwork (albeit probably incorrect or incomplete) somewhere. Either way both plans would have failures. Both the PEO plan fiduciaries and Sponsor A Plan fiduciaries should be aware they likely have fiduciary breaches. Especially if they accepted money that didn't belong to the PEO plan, or sent money from the sponsor A plan that shouldn't have been sent. The PEO Plan would need to disgorge the money and earnings tied to Sponsor A. Sponsor A's Plan needs to try to recover the erroneous contributions. Regardless of where the money was held (erroneously in the PEO plan) the money would be assets of Sponsor A's plan, and should probably be reported as such on the annual accounting, Form 5500s, etc. And to answer your question - Yes something like this would be a significant plan error and should go through VCP. I would not self correct this. No - the money shouldn't go to IRAs. I'm sure others can chime in with things I've missed and further suggestions.

When you say that the 401(k) was mistakenly moved to the PEO, what do you mean? The money was moved? Were there plan meger or termination resolutions or amendments done? Does the PEO have an signed adopting employer agreement from Sponsor A?

A closed MEP is forming and has asked about the 20% Top Paid Group Election. Does anyone have any insight as to the mechanics of how that would work? The plan document is sparse on this topic. Some well paid folks may occasionally switch between entities. Does their compensation from all participating employers count when ranking by compensation? I would think not. The document does say Total Compensation is used, and Total Compensation is that of the Employer. In this case each Employer is separate (as opposed to a related CG or ASG where there are multiple entities treated as a single employer). So only compensation from the entity doing the analysis would count? I believe each entity would do it's own 20% analysis, since each entity's annual testing is mostly done separately, but I don't deal with MEPs often. The top paid group election is a choice the businesses plan on making as a group, as the current game plan is to have all entities ( 5 or 6 small employers) have identical provisions.