CuseFan

Unfortunately, with all the deportations (whether legitimate or not) this is likely to be not such a rare occurrence in our world.

Also, consider terminating the MP and allowing (not forcing) R/O into the new plan. That way you deal with the QJSA notices and elections now at one time rather than having to deal with them on pieces of accounts at varying times in the future. Also, the larger those MP balances get in the future, the more apt someone is to see an annuity as attractive and elect - at least IMHO. Given a very easy direct R/O option to new plan, I would expect a majority to do so.

The decision as to whether someone gets a PS contribution should be made by the EMPLOYER not the specific HCE unless it is an owner-only plan. If the EMPLOYER was smart, they would give a particular HCE a nominal amount so such HCE's compensation may be used in the deduction determination.

100% agree - the deduction limits apply to the eligible compensation of employees who benefit under the plan.

Agreed, but if the first plan was in place less than 10 years then IRS could challenge its "permanency" - so they may want to get their ducks in a row regarding business reason for the termination.

Buyer is still sponsor. Buyer's plan issues, if any, do not automatically and instantaneously go away either, so perhaps the buyer should do the proper thing and address/correct compliance issues and then merge the plans. If issues were due to buyer's deficiencies, controls and procedures should be put in place so same doesn't happen with merged plan. If issues were due to buyer's plan provider/recordkeeper, then maybe target's plan provider should service the merged plan or at least until an RFP can be run for new provider.

Pooled funds I assume? Surrender in and of itself is not a violation, but could a disgruntled participant sue the fiduciary and claim a breach or even multiple breaches - the decision to get in and then the decision to get out? Possible, yes - probable? I think this has come up here before where it was asked whether employer or service provider (new funds or advisor) could make up the surrender charges to the plan to make participants whole, which may have its own ERISA concerns. Employer probably OK, service provider not so sure. I expect others on this forum have dealt with this in the past. Owner likely has largest balance so employer making whole might be palatable.

Buyer sponsors plan, terminates plan, then becomes sponsor of acquired plan. Yes, I think you have successor plan situation. Can they terminate, sure, but that won't be a distributable event. Why not merge plans - what is the aversion? I understand not wanting potential compliance liability for acquiring someone else's prior mistakes, but isn't that part of due diligence and indemnifications? In your situation, if the buyer is willing to sponsor the plan of its acquisition, why would it not want to merge? Unless buyer knows its plan has issues and wants it to go away?

For non-PBGC DBPs, if the plan is not already frozen then you need to provide 15-day advance notice (ERISA 204(h) notice) of an amendment that results in a reduction in the rate of future accruals.

Regarding account balances, I personally believe in accrual based accounting but I know lots of others use cash-based and I think the instructions say you can use either but likely need to be consistent with your method from year to year. I'm long removed from 5500 world so hopefully other and more knowledgeable 5500 practitioners should be able to confirm or correct my response.

Lou answered that on a prior response. Only those NHCEs that benefit must receive gateway, so you can have zeroes in there but you must benefit enough NHCEs to pass testing on ratio percentage.

It would not be subject to gateway if you are not cross-testing and are testing on contributions. You still need to satisfy coverage. If the document is set up with those 3 groups then that could be a reasonable classification and you can continue with average benefits. Then if you need to move someone from group 3 to group 2 to pass you could do via an 11g amendment. If the document just says individual groups then I think it's covering 7 and passing the ratio percentage test or nothing.

Agreed, any NHCE who benefits under 401(a) portion of the plan must get gateway which, for an HCE rate of 5.6%, is 1.866667% or 1.87%, not 1.86%. Also, to pass coverage using average benefits the first requirement is a reasonable classification. What was the reasonable classification used to determine the 4 (or 5) NHCEs out of 10 to give profit sharing? Picking the youngest and/or lowest paid doesn't fly the reasonable plane. You don't need reasonable classification once you get to nondiscrimination testing, but you can't fly there until your coverage flight gets off the ground.

Yes, but any investment earnings must be distributed as well and would need to go to a traditional IRA to further defer taxation.

This is the language from FTW SPD and still shows $110. Enforcing Your Rights If your claim for a pension benefit is denied or ignored, in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules. Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request a copy of Plan documents or the latest annual report from the Plan and do not receive them within 30 days, you may file suit in a Federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Plan Administrator. If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or Federal court. In addition, if you disagree with the Plan's decision or lack thereof concerning the qualified status of a domestic relations order, you may file suit in Federal court. If it should happen that Plan fiduciaries misuse the Plan's money, or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a Federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous.

The tax treatment of the distribution cannot control/deny someone of future participation. However, it can affect tax treatment of future distributions. If the person takes a permissible LS (total distribution) under the terms of the plan and applies NUA, then any future distribution attributable to future participation would be precluded from using such. I would not think such would retroactively negate the prior NUA treatment but would seek qualified tax counsel for that. I would also be EXTREMELY careful on distribution timing, what constitutes a lump sum and future participation. I think you would need to avoid any contribution after the distribution but in the same tax year as such that creates a balance at year end. Get qualified tax counsel and/or financial planning assistance AND understand your plan's rules and it's administrative environment as any misstep could prove expensive.

Exactly. Also, a person who works <1000 in first 12 months but >1000 in next computation period (as plan defines) should participate on next entry date, but the language as crafted would exclude that person, impermissibly. Find out exactly what the plan sponsor is looking to accomplish, reconcile that with the law, and then clean up the language for them.

I would recommend this but it is the client's call, and certainly very defensible, especially if the residual and payout happened in Q1.

I would also say to do a little forward looking here as well, or ask your question poser to do so. Is there an owner with substantial income being covered and might such owner be interested in a cash balance plan. Also, is the owner substantially older than the employees? Remember, everyone gets same percentage in SEP. A cross-tested safe harbor 401(k) profit sharing plan could provide an owner with the same or more contributions at a lower employee cost, more than offsetting the added admin cost. And if a CB is in the future, such does not pair with a SEP.

Agreed, just make sure the plan provisions clearly define the excluded class, say employees on a work visa. That keeps them out regardless of hours and LTPT rules. Coverage and NDT will not be an issue provided no HCE is ever covered.

Similarly, if remaining account balance investments incurred a 20% loss, you wouldn't be forced to call the loan because it then exceeded 50%. As Bri said, it's an origination snapshot.

Remember that MPPPs are subject to minimum funding due 8 1/2 months after PYE (9/15 for calendar year plans) similar to DBPs. In that manner, I believe you may have a funding deficiency. However, if checks were cut/mailed by the due date but not received/deposited until a couple of days later you may have wiggle room - but if a late electronic transfer then truly late.

Statutorily, yes, but make sure the plan's provisions allow.

Accrual rules get applied to an amendment as if it had always been in effect, is my understanding. That is, an amendment would not create an accrual rules violation unless on its own it was not compliant with the rules. If the plan has been in existence less than 5 years, I'd get all documents and subsequent amendments from the start to see the historical formula changes (if any) before consulting or opining on whether or not it is advisable to do a 2025 benefit increase.

Exactly. "Sorry, you should not have been allowed to participate and contribute. Here are you deferrals and attributable income back, any employer contributions we've made for you will be forfeited." I'd be shocked if your (pre-approved) plan document did not support that course of action.