C. B. Zeller

You can let them in after 6 months if they complete 1000 hours in 6 months, but you can't keep them out if they complete 1000 hours in more than 6 but within 12 months.

Is there a controlled group or affiliated service group? It sounds like there is probably an ASG, so if that is the case, then you can keep the existing plan, but it would have to be aggregated with the partnership's plan for most purposes. You said the partnership has a safe harbor plan, so I am assuming there are NHCEs covered by the plan. In that case, it's going to be problematic for the one partner to maintain his existing plan since it can't be aggregated with a safe harbor plan for ADP testing, and it will fail coverage due to the non-covered NHCEs.

The 5500 and 8955-SSA (IRC 6057, 6058, and 6059) are covered under the rev proc so there should be no need for them to be mentioned specifically.

Under 1.401(k)-1(d)(4)(i), you can not make distributions from a 401(k) plan upon plan termination if the employer sponsors another defined contribution plan at any time within the 12 months after the distributions from the plan are complete. This is sometimes known as the successor plan rule. Because this was a stock purchase, the purchaser is now the sponsor of both plans, so they could not terminate one while continuing to maintain the other. They either have to maintain both indefinitely, or merge one into the other.

The minimum funding deadline (IRC 430(j)(1)) is not covered under rev proc 2018-58. The deadline to make a deductible contribution for a given year (IRC 404(a)(6)) however, is covered under the rev proc and under 301.7508A-1. Worth mentioning in this thread that the January 3 deadline was just further extended to February 15. https://www.irs.gov/newsroom/hurricane-ida-tax-relief-extended-to-february-15-for-part-or-all-of-six-qualifying-states

No. 1.401(k)-2(a)(5)(vi)

There is never really a good time for their site to go down, but they have to do maintenance sometimes. That said, I don't remember seeing anything announcing this ahead of time. It is possible this was unplanned? Maybe related to the recent AWS outages? Assuming it does come back up on 12/22 as scheduled, that still leaves you a full week (even accounting for holidays) to get your filings submitted. If this downtime really does prevent you from filing on time, you could try asking them for an extension, or at least a waiver of any penalties. They are usually pretty reasonable.

How? Unless there is a management service group, there has to be some common ownership in order to have an ASG. An asset sale (by definition) doesn't involve the transfer of ownership. So unless there was an ASG before, the mere sale shouldn't have the effect of creating an ASG. If there actually is an ASG, then the two companies are treated as a single employer. So the question becomes, can the employer who maintains two 401(k) plans terminate one and have a distributable event while continuing to maintain the other? The answer is no.

From the instructions to 1099-R: No withholding on direct rollovers.

29 CFR § 2520.104-50

https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR6f8c3724b50e44d/section-1.401(a)(9)-9

Sounds like they applied the correction under Rev Proc 2021-30 Appendix B 2.07(4)

1.401(a)(4)-7(c)(2) and (3)

PPA sec. 1103 directed the IRS to modify the requirements for filing a 5500-EZ to define the term "partner" as including a 2% shareholder in an S-corp, as defined in 1372(b). 1372(b) references 318 for attribution of ownership. That change finally made its way into the instructions for the 5500 series starting with the 2020 forms. PPA did not modify the definition of employee benefit plan in Title I of ERISA. So the daughter is still considered an employee for all other purposes under Title I. It was @RatherBeGolfing who pointed this out to me in the first place, so maybe they would be willing to chime in as well.

About 2 months after this thread happened, the IRS released Notice 2020-50 which explained how they want loans that were suspended under the CARES Act to be handled. The notice provided a safe harbor which was to have repayments commence on 1/1/2021 and re-amortize the loan over the original term plus 1 year. They acknowledged in the notice that there may be other reasonable methods of handling it as well.

Just a note that while this company would file 5500-EZ, they are still subject to all the other requirements of Title I - bonding, SARs, etc.

I don't think you're going to find it in black and white anywhere, but it comes from the definition of deferrals. Only deferrals can be classified as catchup. In order to be a deferral, the amount has to have been payable to the employee as cash, if not for the deferral election. If the amount exceeds your earned income, then it wouldn't have been payable to you in cash, hence it couldn't be a deferral.

The loan is the investment. When I take a loan from my plan, the money does not leave the plan; I am just liquidating $50k from ABC Mutual Fund and moving it into a different investment. Instead of moving it into XYZ Mutual Fund, I am moving it into a note that promises 4% interest per year. Repayments are transfers from the loan investment back into ABC Mutual Fund. I hope that makes some sense. Although, it sounds like this individual is struggling with some basic concepts about what a loan is. If I borrow your car for the weekend, can you go for a drive on Saturday night? No, because I have your car. Does the car still belong to you? Of course it does.

Successor plan issues aside, there may be a nondiscrimination issue if the timing of the plan termination was such that the NHCE would not benefit. See the rules under 1.401(a)(4)-5.

If you can get all of the participants to repay their distributions back to the plan, it could probably be undone. You would treat it as an overpayment and correct under EPCRS, since the distributions were made in the absence of a distributable event. However it might be simpler for the new employer just to start up their own 401(k) plan, and have the participants roll over their loans into the new plan. Since it was an asset sale there should be no successor plan issue.

I am not aware of anything that says you have to take other plans of the employer into account in determining if a partial termination occurred in a given plan. That said, the fact that a partial termination was determined to have occurred in another plan of the employer that covered one or more of the employees in this plan might be a circumstance that would suggest a partial termination has occurred in this plan as well. If the single affected participant's unvested benefit is not large, the employer might consider making them vested anyway, just to be on the safe side. It is probably cheaper than hiring an attorney.

1 / 6 = 16.667%, so there is no presumption of a partial plan termination on the CB plan. However, whether a partial plan termination occurred is a facts and circumstances determination. The reduction in active participants is not determinative. Does the partial plan termination relief from last year's Consolidated Appropriations Act apply?

You would use the 2020 form because the 2021 form is not available yet. If you wait a month or so, the 2021 5500-EZ will probably be available and then you would need to use that. Speaking of the 2021 5500-EZ, I seem to remember that the IRS actually did publish it a couple of months ago, but it seems to have disappeared from the internet.

I don't think it's entirely clear either way. The document we use actually has a checkbox for whether or not a participant who terminates employment on the last day of the year will be considered to be actively employed on the last day of the year for purposes of satisfying allocation conditions.

I would replace "by law" with "to obtain a favorable determination letter." The IRS has been known to impose requirements on authors of pre-approved documents that are more stringent than what exists in the text of the law or regulations. For what it's worth, the document we use does say that the match will be forfeited in this situation. But you would need to examine the documents of the two plans in question to be sure.