C. B. Zeller

In order to be a safe harbor definition of comp, it has to include 125 deferrals as well as 401(k) deferrals. Box 5 is grossed up for 401(k) deferrals but not for 125 deferrals.

The short answer is that the participant must commence distribution of 100% of their accrued benefit no later than their required beginning date. However this is a very complicated topic and there are a lot of pitfalls and nuances to it. Mary Ann Rocco did an excellent 2-part webcast on this topic recently, it's available on-demand from ASEA if you want to learn more. https://www.asppa-net.org/asea/events/webcasts/on-demand/

My first thought is to say, if the transaction is closing on 10/1 for example, then amend the plan to say that for the 2024 plan year, employees who were employed by A on 9/30/2024 are eligible for the contribution. But there are a lot of unanswered questions here. Is A's plan being terminated before the sale? Or is it being merged into B's plan? Does B even have a plan? Will B's employees be eligible in A's plan after the transaction?

If I'm understanding you correctly, your question is about the application of entry dates when determining who is an otherwise excludable employee. The Chief Counsel memo that you referenced essentially says that, in the context of 410(b) and 401(k)(3) (and presumably 401(m)(2) and 401(a)(4) as well, although not explicitly stated), there is more than one way to apply it, so anything reasonable is fine. I don't see why it would be any different for 416, and in the absence of explicit guidance, I am perfectly comfortable using the same interpretation.

You're overthinking it. Nothing in SECURE 2 says that top heavy is "tested separately" and to be honest I don't know where this common misunderstanding is coming from. The top heavy determination is still done based on all participants in the plan. There is no disaggreation for determining the top heavy ratio. What section 310 of SECURE 2 says is that, for plan years starting in 2024 and later, otherwise excludable employees no longer have to receive the defined contribution top heavy minimum. That's it.

The citation in the law is at ERISA 105(a)(1)(A)

I'm not sure if I agree. The definition of the universal availability rule in 1.414(v)-1(e) only requires that all catch-up eligible participants have the opportunity to make the same dollar amount of catch-up contributions. It does not require that a plan permit participants to make the maximum amount of catch-up contributions permitted under the law. So a plan could say that catch-ups are allowed, but we are limiting catch-ups to $1000. And if they could do that, it seems like they should be able to limit catch-ups to the regular (50-59,64+) catch up limit as well.

For plan years beginning in 2023, the 5500-EZ uses the 250 returns rule. For 2024 it switches to 10. https://www.irs.gov/forms-pubs/about-form-5500-ez The 2023 instructions linked on that page state:

No. You check "Automatic Extension" in the same section.

A safe harbor match can not require hours in order to receive it on a year-by-year basis, but it can have a service requirement for initial eligibility. No, you can have different eligibility for deferrals and safe harbor match. The major consequence of this design is the loss of the top heavy exemption, as Bri noted earlier. Under this design you are technically doing an ADP test for the disaggregated portion of the plan covering otherwise excludable employees, since that group is not covered by the safe harbor match. It is unlikely that there would be any otherwise excludable HCEs, so that group should always pass the test automatically. But it's something to be aware of. No, you can have a service (hours or elapsed time) for initial eligibility for matching contributions, including safe harbor matching contributions. If your document uses a checkbox-style adoption agreement, there are probably options for this. A plan that consists solely of deferrals and matching contributions which satisfy the ADP and ACP safe harbors is exempt from top heavy. This is determined based on the contributions that are actually made to the plan on a year-by-year basis. A plan can permit non-elective contributions but will not lose its top heavy exemption unless non-elective contributions are actually made (or forfeitures allocated) in a given year. Likewise, making non-safe harbor matching contributions will also cause the plan to lose its top heavy exemption.

Could the plan pass using the average benefits test? Are we talking about the deferrals, match, or profit sharing portion of the plan? Does the plan document address what will happen in the event of a coverage failure?

It's based on the total account balance, not the amount of the loan. See 1.401(a)-20 Q&A-24

You were taught wrong. The due date of the contribution is the due date of the employer's tax return, including extensions. See IRC 404(a)(6).

With regard to question #2, I don't know of a specific authority in ERISA, however this kind of modification was specifically contemplated in IRS regulations and is one of the permitted exceptions to the general rule that annuity payments may not increase once they have begun.

Notice 2024-02 describes several situations involving plan mergers and indicates that if the surviving plan includes a pre-enactment qualified CODA, then the plan is not subject to the automatic enrollment mandate. In this case there is no plan merger, simply another adopting employer. So it seems to me that since there is only one plan involved, and that plan includes a pre-enactment qualified CODA, that the plan is not subject to the automatic enrollment mandate.

Self-employed individuals have to complete a deferral election before the end of the plan year. Whatever they put on that election will determine how much their deferral is. The safe harbor non-elective contribution will be 3% of their net earned income. That will be a circular calculation, so it's not generally possible to know exactly how much it will be before the end of the year. If earned income is expected to be well above the 401(a)(17) limit then it might be reasonable to use that. Assuming profit sharing is discretionary, it will be whatever amount the employer decides to allocate, within the constraints of sections 404, 401(a)(4), and 415.

Is everyone who is eligible to defer (regardless of whether or not they elected to) also eligible to receive the safe harbor match? In other words, is the eligibility the same for deferrals and safe harbor match? Or do they have (for example) immediate eligibility for deferrals, but 1 year of service for match? If everyone who could defer would be eligible to receive the match if they deferred, then you are good on the top heavy exemption. However if there is anyone who is eligible to defer but not covered by the match then the plan is not exempt from top heavy, even if no contributions other than deferrals and safe harbor match are actually made. However however if the only employees who are eligible to defer but not receive a match are long-term part-time employees (who are eligible solely because they met the LTPT eligibility criteria) then the plan retains its safe harbor top heavy exemption.

Is this a DB plan, or other plan subject to QJSA? If so, does the plan exempt distributions between $1,000-$7,000 from the QJSA requirements? If it does, then I agree with the other commenters that you can go ahead and distribute the single sum upon plan termination. If it does not, then you have to make the distribution in a form that preserves the QJSA rights. This probably means buying an annuity contract, or transferring the benefits to the PBGC's missing participants program. Optional forms of benefit with respect to distributions less than $7,000 are not a protected benefit under 411(d)(6), so the annuity options could be eliminated without disqualifying the plan. Once the annuity option is eliminated, you could distribute the single sum. However, if the plan is covered by the PBGC, you may not amend the plan to eliminate a form of benefit after termination, regardless of whether it would be ok under 411(d)(6).

This might be back pay within the meaning of 1.415(c)-2(g)(8). If so, it's considered compensation for the year to which the back pay relates, so 2022 or 2023 in your case. Does the document address back pay at all?

The applicable interest rate for 417(e)(3) is tied to the stability period containing the annuity starting date - not the termination date. So if the stability period is the calendar month, then the interest rate would change if the distribution is paid in July versus, say, August. However if the stability period is the calendar year, then the interest rate would not change until January. It's possible, although it seems unlikely to me, that the actual accrued benefit (not just the lump sum equivalent) could be affected by one day of re-employment. You'd have to look at the plan's benefit formula to see.

In general, the required contribution in a defined benefit plan is based on the difference between the market value of assets and the actuarial present value of accrued benefits, measured on the plan's valuation date. A significant decline in the market value of assets could result in an increase in the plan's required contribution (conversely, a sudden rise in the value of plan assets could result in a reduction in the maximum contribution, possibly to the dismay of an employer who was looking forward to a large tax deduction). The increase in the required contribution due to a drop in plan assets may not be dollar-for-dollar however, as the "funding shortfall" amount is amortized over a period of 15 years. This only speaks to the minimum required contribution under ERISA 303 / IRC 430. Plans may have a funding policy that directs the employer to contribute an amount larger than the required minimum. Cash balance plans may use an interest crediting rate based upon the actual rate of return of plan assets, which may even be negative (although the "preservation of capital" rule of 26 CFR 1.411(b)(5)-1(d)(2) prevents the interest credit rate from being negative on a cumulative basis). Proponents of these formulas claim that it ensures that plan liabilities will always be in line with assets; in other words, if the sponsor contributes the amount of the pay credits each year, then the assets will always equal the hypothetical account balances. This may be true, however it can be problematic for smaller plans, especially those that are tested together with a DC plan.

From the instructions for this line: The highlighted portion seems to describe your plan, so it might make sense to check "N/A" as described.

In addition to Peter's helpful sources and reasoning, I'll point you to IRC 413(c), which lists several purposes for which the employers sponsoring a multiple-employer plan are considered to be a single employer, including: 410(a), regarding service required to participate in the plan 411, regarding service required to become vested in the plan 401(a), but only as it regards whether the plan is for the exclusive benefit of the employees of the employer and their beneficiaries Congress could have added section 401(a)(9) to this list, but they did not. Which implies that the employers maintaining a multiple-employer plan are treated as separate employers for purposes of 401(a)(9).

I don't see a BRF issue unless there is some benefit, right or feature that is available to HCEs but not to NHCEs. Getting rid of the ERA for everyone shouldn't be a problem. There might be a 411(d)(6) issue but again, what is actually being removed if you eliminate the ERA in the DC plan? Not the availability of distributions, since you can still have that at age 59½. Not full vesting, since the definition of ERA already requires 6 years of vesting service. Is there something else that is granted by the attainment of ERA in the DC plan that could be a cutback if eliminated? Read the document to see, but I can't think of what that might be.

I would just eliminate the ERA in the DC plan. What is it even doing there? Since you can already have distributions at age 59½ without needing an early retirement feature, you should be able to remove it without it actually being a cutback. No need to add an ERA in the DB plan. Your testing age will still be NRA. I don't think I've ever seen a DB plan with an ERA that is combo-tested with a DC plan. I believe that in that case, you would need to test the MVAR at every early retirement age to see if it is more valuable. So my recommendation is, don't do it.