RatherBeGolfing

Ah that makes more sense. The answer to your question on final testing is... It depends. From your description, the spun off plan will not accept ongoing contributions, it is created just to facilitate the distribution of assets. I would structure the spinoff documentation in such a way that the "new plan" terminates on inception, there is no activity other than the transfer in and distributions. Final testing would happen in the PEP, transfer assets to the spin off plan, and finally distribute the assets. For 5500 purposes, the PEP reports the transfer out, and the spin off plan reports the distributions.

Yea the SEP part of the question doesn't make sense OP, can you expand on that? Generally speaking, ceasing participation in a MEP/PEP is not a distributable event. A participating Employer / Adopting Employer cannot terminate the MEP/PEP, or their portion of the MEP/PEP. You can spin off your portion of the MEP/PEP though. Your starting point should be to speak with the MEP/PEP provider. They should have information for you.

I agree, your 5500 should reflect the contributions, not the deposits. I would book the earnings in the year of correction. Otherwise you would need to split earnings over both years to be accurate, and I just don't see the point. Just be consistent.

Agreed. Let the referring party know that what they need is an ERISA atty, and that you would be happy to take it on once corrected.

Then no issues with using the forfeiture. In fact, you would probably create an issue if you don't use the forfeiture when available.

You didn't bring it up, but no issues with partial plan term, right? Asking since "this was the only non-key participant"... Assuming forfeiture was proper, I don't see a problem using it to fund the THM.

I'd also add that it was taxable when available to them; they can't escape that by not cashing the check (constructive receipt)

We have had an issue or two with 5500s in FTW over the last couple of months, but nothing that lasted more than 30 minutes to an hour.

No, we haven't had any problems (FTW users), but we file directly, not on behalf of the sponsor with a signed copy. How you file shouldn't matter though, SSL handshake is client/server issue, so its a Datair/EFAST issue. No comment from Datair on this?

@Peter Gulia I think its more nuanced than that. The OP states that if the account balance is less than the distribution fee, the account is forfeited. So its not that the distribution fee results in no net payment, the balance is forfeited instead of being consumed by the distribution fee. I share @BG5150 concern here.

As far as I'm aware, this is not an option. It wouldn't pass edit checks since the IRS logic looks for $0 in EOY assets and no participants at the end of the year for a final 5500.

Does it already allow for elective deferrals or is it just PS at this time?

I have always filed using third party software, which produces an AckID for Form 5558 filings. I would still start with EFAST, but be prepared to have to go to the Office of the Chief Accountant.

Im assuming this is not the first year filing a return for the plan, and you filed an SF for the prior year? If so, you can continue to file an SF until you cover more than 120 participants and meet the other eligibility conditions (total of eight conditions). See instructions to the 5500-SF, page 3, Who May File Form 5500-SF, for all conditions.

Sounds like you have an AckID then, so you can prove that it was filed. I would start with EFAST support, but when it comes to issues beyond what can be found in the instructions to the forms, they usually refer you to Office of the Chief Accountant at the DOL at 202/693-8360.

@SSRRS Did you file using third party software (FIS, FTW, etc...)? Did you get an AckID, or did this prevent you from actually getting it filed? While I agree it sounds like an error on their end, it will probably take quite a bit of back and forth to get it resolved.

Without looking I know about 10 in my area, so we actually CAN have a party! 😆

I doubt it. Its more likely that the process is just chaotic and full of issues. It has been since day one.

Agreed, this is EA renewal which has a different cycle and different due dates

Said another way, its incredibly rare to test more than a handful of rates. Everyone in their own group, maximize owner, and 5% to all others is very common (as long as it works for testing of course).

I have also seen an additional issue with EBSAs software. The software looks for accounts with a balance at BOY. It does not catch that if you are filing for the first year, you look at accounts with a balance for EOY to determine if its a large filing or small filing. This is true even if the return first return is indicated on the 5500. It will calculate a penalty capped at $750.

Its likely that no notice is required at all for the SHNEC, so really the only issue is that some participants may have changed their elections for 1/1/26 to get the full match. I could see an argument that they should have a reasonable time to change it less if they want to, but I don't think that is a facts and circumstances argument against the SHNEC. They may defer more in the first pay period than they would have if they had not received a SHN with 4% match. From a compliance perspective, I think they are ok. They may have some upset employees/participants, though.

Agreed. And most documents say that the SHNEC is at least 3%, so you may be able to do 4% for 2026 and 3% for 2027 without the need for amendment.

Editing my initial answer since I misread the question . You are asking if you can amend the plan by 12/31/2025 for a 2026 change from SHM to SHNE? Technically, you can make the change at any point before the plan year starts. A question that could be asked is whether participants will have a reasonable time to make changes to their elections after you amend, and if they are negatively impacted by the change if they do not have reasonable time to change their elections. I think you are fine since you are providing the SHNEC in place of the SHM and participants will not miss out on any of the employer contributions even if they do not have enough time to change their elections for the first payroll. It would be different if you went from 3% SHNEC to 4% match and a participant did not have time to change their election to receive the full 4% match.

Happy Holidays from sunny Florida!