Larry Starr

The IRS considers a 401(k) plan terminated only if: The date of termination is established (this can take the form of a plan amendment, board of directors’ resolution, or complete discontinuance of contributions); The benefits and liabilities under the plan are determined as of the date of plan termination; and All assets are distributed as soon as administratively feasible, generally within one year after the date of plan termination. So, what happens after the 12 months and the IRS doesn't consider the plan terminated? Did I prematurely vest some people to 100%? Are there any adverse effects other than having to file 5500s and keep the plan up to date? You are missing the fact that the IRS will NOT consider the plan not terminated except in very dire situations. I think you are overworrying this issue. Notice it says "generally within one year". Many, many, MANY plans take more than one year with no problem.

Once the change of ownership form is signed and submitted, I believe the ownership has changed. Doesn't matter how long it takes the insurance company to respond. Of course, your second sentence is a problem all of its own....

Sure it can; what do you see as the problem? ADP will pass (no NHCEs). Effective date can be 1/1/19 with no problem, just make sure you have an entry date that brings them all into the plan by 12/31/19.

"Trust me; I'm your plan advisor". What client even understand the notice issues????? None of mine.

Yes.

Many plans go beyond one year. One basic acceptable reason (but there are an infinite number of other acceptable reasons) is "waiting for IRS approval".

Go back to my original answer in this posting. Accelerated vesting was required when you terminated the plan (adopted the amendment to terminate). Not even sure what you mean by "accelerated vesting now bunk", but I think my answer covers it (whatever that means). Is "bunk" an ERISA term??? ?

Yes; as long as there is an asset owned by the plan, you have "plan assets" that are required to be reported. Changing the ownership should be one of the easiest things you have to do.

And I would suggest this is problematic. If you are operating a pooled account, then all of a sudden to have an allocated account within the pool could be an administrative complexity that you would not want to deal with. I see no issue in dealing with the other items listed as that's just part of normal admin. FWIW.

That is clearly the best answer for you and your client!

Um... you treat the two plans as ONE; test it as one plan (think of it as two divisions of a single company if that helps). So you would aggregate the compensation and everything else.

Happens ALL the time; you have 5500s required until there are zero assets. For example, terminate a plan effective 12/31/18 (we never terminate 12/1, but you might have some unknown reason for doing so). File with IRS for approval, maybe 4/1/19. Wait for IRS approval which come 2/1/20. Start distributions in 2020. Hope that they all will be out by 12/31/20. File 5500s for 2018, 2019, 2020 if all money is out by then. No big deal.

Because that is completely unnecessary and not what any knowledgeable plan advisor would suggest.

Yes; again, a new plan has until October to give the notice. You are setting up a plan NOW for NEXT MONTH; you have until October to set up a new SH plan. You can set it up in, say, May, effective the prior 1/1, and you are still ok. What part of that is unclear?

Correct; the question that immediately comes to mind is "are you working with a pension professional" and if so, why are YOU doing the research (with the risk that you will make mistakes). Reminds me of an old "book title": Brain Surgery, self taught!

Because the PARTICIPANT doesn't have the ability to change the investments in the menu, so he needs to know only the costs associated with each. The fiduciaries need to know the breakdown because they have to decide if the total is reasonable; but they don't have to explain their decisions to the participants (unless they are being sued!). The other answer to your question: "Because that's the law".

Complete info PLEASE! Is this a brand new plan? Is this an amendment of some sort to an existing plan? What will be the effective date of the plan (oh, I just found it, but always but all the data in the body of your posting to make it easy on us). What does SHS stand for? If this is a new plan being set up in December for next year, then of course you can do it now. Since you can actually do it until next October, the PRIOR December is just fine. Are the facts different?

And to add fuel to the fire... we have very few of these type of contracts left (thankfully), but we always value the account at the market value (rather than the "fake" book value) in our annual valuations and reportings. If you can only get $9,000 if you surrender the contract that they say is "worth" $10k, that's like a $10,000 bond that is currently only worth $9,000 due to "market" adjustments. Why should we use anything other than $9k as the true value? Yes, I know this is controversial with some people, but not me! ?

Exactly what I would do. Good thing you asked, because your solution is certainly overkill; it is a simple solution. Interesting that you said: "Whenever something seems relatively straightforward in these situations, it makes me nervous". Just a reminder: NOTHING in our business is every straightforward! ? Happy T-day to everyone.

Never have seen such an arrangement in 35 years. What is your role and position with this client? Who designed the plan and is administering it? If you want better info, it would help if you completely described what is going on and what your responsibility/relationship is.

Yes, I hope he does come back with more info. Have a great T-day EVERYONE!

Perfect; now you have isolated the issue. I'll see what others have to say, as now I believe it's more likely you will get other responses. Have a great T-Day ALL!

Luke, I don't think you can "guess" that we have enough info to answer the question. By that very admission, you are saying that we DON'T have enough information to definitively answer his questions, which were (as a reminder): Does the 401k provider have the right to freeze the plan ? When can the participants expect to roll their money over, after 1/1/2020. Of course, you can post various possibilities given various assumptions, but until we KNOW the situation and what is actually happening here, we just can't answer the question with any degree of certainty. We don't even know if it is a pooled account or a participant directed account. Just, FWIW.

Let me answer this the way I get my employees to think about the issue.... with a bunch of questions (I can always just give them the answer, but that's not the way we get them to learn and think these things through; I'd rather confirm their analysis than just give them the answer). Why are you asking? Do you think that you maybe can't do it? What do you see as the issue or concern about doing this? If you do it, what is the problem you are concerned about? It's a good way of getting at the heart of the question and the reasoning for the proper answer. FWIW.

Sure, but that's NOT the same as disqualified! Only the IRS can disqualify a plan; we can't do it ourselves. So if you go to IRS and ask them to do so, they may say no. They can impose other sanctions (who knows what they will come up with), including turning it over to DOL who can figure out how to enforce the rights of the participants to that money. Remember, the participants have a legally enforceable right to those funds, and that's where you will run into problems. FWIW.