Luke Bailey

Right. I assume you're asking about ratio percentage, in which case, to see if one or both pass(es) separately, use 3 months for numerator (benefitting) and also 3 months for denominator (all employees in controlled group , whether covered or would be covered by Plan A or Plan B) for Plan A, and conversely 6 months when testing Plan B. In other words, to see if they pass separately, each plan is tested as if they other did not exist. See Treas. Reg. 1.410(b)(5)(A) and (B).

Interesting. I think Peter's and the others' cautions above should be carefully considered, BG5150. You might also want to Google the Ablamis v. Roper case out of 9th Cir. Of course, assuming you are the plan's TPA and not the company's or plan's legal counsel, your role would seemingly be to advise the plan administrator, which in this case may be that it should seek legal advice.

Agree with Peter, but it will be essentially two plans living sort of in one plan document. Probably not, but talk to a bankruptcy lawyer. It's going to be the same rule as owing salary or rent, or whatever. Without some sort of fraud or collusion for the stronger financially to prop up the weaker or make it seem more creditworthy, or employees providing services to both companies and funny business with where the NQDC for those services is placed, their debts (which is all the NQDC is) should be separate. This seems like the same question really as 1 above. The creditors are not going to want benefits, they will want assets. I suppose if one of the individuals owed benefits under the nonbankrupt plan had a hand in some alleged financial chicanery that harmed the creditors of the other the creditors could go after that individual's benefits, but then you are into a very messy and creditor unfriendly area of trying to garnish someone's NQDC. Probably impractical unless the individual is close to a payment event. In terms of the IRC, the companies must pay for their own benefits, of course, otherwise they are making capital contributions to the other company. Assuming the plan constitutes a "retirement" plan under ERISA (which it probably would, but might not if it had in-service payment dates), ERISA will preempt all state laws, but says nothing really about the substantive rules for NQDC.-

Totally agree with everyone above that to reach any real conclusion, a full review of the documents would be required. However: *Unless they resigned or were removed by the employer, the two individuals in question are probably still the trustees. * You should identify who is the plan "administrator" or "administrator" under the document. This person is usually the company itself, but could be a "committee," but this person or body under most plan documents would have greater authority to approve a distribution than the trustees. Unless the plan administrator is the two individuals who are trustees, I would see approval for the distributions from the plan administrator. * I would also identify who under the plan document has the authority to remove and appoint trustees. Almost certainly it is the company, e.g. if a corporation the board, if a partnership the Managing Partner or Management Committee. I would inform that person or body that they should consider that two departed individual who are seeking distributions are the plan's trustees and that they should consider appointing new trustees. * If you do bullets two and three above simultaneously, you may find out pretty quickly whether, aside from legal issues, making the distributions will be controversial. * Most likely as the TPA you are not required to take any controversial actions. * Remember, distributions generally must be made "as soon as administratively feasible." The circumstances you describe should impact the timeframe of administrative feasibility here.

Good to know, IDR. Thanks.

That is my experience as well, Patricia.

That was my guess as well, in the end, EBP. One thing I would point out is that my recollection is that before the SECURE Act the IRS was perhaps better at publishing its own good faith amendments.

That is the reality, Peter.

Thanks, Peter. I think that's right. For ongoing plans, it's not really a problem. But if you have a client that, e.g., is undergoing a stock sale and the acquirer wants the plan terminated before close, the plan needs its own, individually designed good faith amendment for SECURE and CARES Acts.

I have a situation where client wants to terminate its 401(k) before a stock sale. Client uses a Fidelity preapproved document and has already adopted its restatement but is being told by its Fidelity rep that it needs to come up with its own good faith amendment for SECURE Act and CARES Act because Fidelity does not have yet and will roll those out only later this year. I have a form of good faith amendment that I can use for this client, but I am a little incredulous that Fidelity does not have its own by now. Can anyone confirm or deny what the client’s Fidelity rep is saying? This must have affected a lot of terminating plans over the last couple of years.

Would seem to be a creative and reasonable approach. Not completely predictable of course because your dealing with discretion and personalities. If there was nothing unusual in the plan's facts that pushed the ADP to the low side for the first months of the year, you'd think it should be OK.

ERISA-Bubs, that would seem to be a deferral feature that would not seem to fit within the exceptions permitted in Treas. Reg. 1.409A-1(b)(5)(i)(D) so I think would be a problem. ERISA-Bubs, that seems like any other right to further defer NQDC, so if exercised a year before payment would otherwise have been made and pushes payment off by a minimum of 5 years would seem to be OK. In the above I am responding to your brief explanation of what I interpret as a hypothetical. A variety of facts and circumstances could affect the actual answer, so the above is just to prompt your own thoughts and research.

BG5150, Rev. Proc. 2021-30 refers to the percentage "for the year of exclusion," so I think they would want you to calculate the percentage separately for each year.

Had forgotten the Rev. Rul. Thanks, Brian.

C.B. Zeller, if SCP were used and the amendment went back to 2021, it would be deductible for 2021, I think, if the employer is on extension for its tax return. But if the amendment were made for 2022, i.e., not as a correction, then would not seem to meet the "on account of such taxable year" requirement of 404(a)(6) for 2021.

Belgarath, one version was deleted, this was up. Why did you want to delete?

Agree with above, but would point out that if you wanted more time you could "freeze" the plan instead of terminating it.

As a practitioner, there's nothing I can do about it. Schwab, Fidelity, Vanguard, etc., presumably want it and have large lobbying war chests. We just have to deal with whatever our "public servants" in Congress decide to do. As a citizen, I think it's a good idea. In fact, I wish private employers could do mandatory pre-tax like state and local governmental plans.

Belgarath, you're talking asset sale, right? Otherwise there wouldn't be an issue. As far as I know, the IRS had not published any guidance. In most of the deals I've done for the last 15 or so years the buyer was comfortable with giving the seller's employees credits in its own cafeteria plan equal to what they had remaining in the seller's plan as long as the seller transferred the cash. I could provide an explanation of why that should be OK from a tax standpoint, but it's pretty common.

If it's a nondiscriminatory group you could amend the plan to provide a higher contribution rate for these participants for 2022, right? Would delay the deduction by a year, though. If the contributions/allocations were already made without knowledge that the plan's rules did not permit them, then I think you could amend the plan retroactively under SCP to provide for the allocations. See Section 4.05(2)(A) of Rev. Proc. 2021-30: (a) Correction of Operational Failure by plan amendment for a Qualified Plan or § 403(b) Plan. A Plan Sponsor of a Qualified Plan or § 403(b) Plan may correct an Operational Failure by plan amendment in order to conform the terms of the plan to the plan’s prior operations only if the following conditions are satisfied: Rev. Proc. 2021-30 Page 16 of 140 (i) The plan amendment would result in an increase of a benefit, right, or feature. (ii) The provision of the increase in the benefit, right, or feature to participants is permitted under the Code (including the requirements of §§ 401(a)(4), 410(b), 411(d)(6), and 403(b)(12), as applicable), and satisfies the correction principles of section 6.02 and any other applicable rules of this revenue procedure.

Right. The PLRs that first acknowledged the ability to do loan rollovers back in the 1990's and put them on the map, if I recall correctly, stated in their facts that the entire accounts were being rolled over, including the loans. But I think it's probably not really a requirement under the law.

Got it. It's separate from the post. Didn't notice. Thanks, Bri.

Bri, the OP does not exclude the possibility that the plan being frozen is a DB or MP, which would require a 204(h) notice.

EBECatty, are you aware of a rule that would prohibit the direct transfer of only the loan?

OK, EBECatty. Although "earliest" and "latest" suggest at least three alternative events, and the OP posited 2, I think you're probably right. Thanks.