Doc Ument

To answer the original questions: The 411(d)(6) regulations permit profit sharing sources to have the QJSA removed if the conditions of the regulations are met (sorry, I can't look up the exact cite). However, most plans that have a lump sum option will qualify. I strongly advise you to find the reg to confirm all conditions are met. This only works for non-pension sources - for eample, rollovers (including direct rollovers) from DB/MP plans can be made exempt from QJSA via an amendment because the QJSA was stripped when the distributed funds from the other plan were distributed from that other plan with spousal consent. However, direct transfers from DB/MP plans would cause the funds to retain their character as pension assets, and the QJSA would remain intact (and preapproved plans should so state). Most plans allow you to have QJSA to only the funds that need QJSA, if you like (then you have both sets of rules potentially applying to the same participant - so enjoy all those forms). If you amend to do this, you have the practical concerns expressed by the preceding commentators. For the NRA, you need to protect age 65 as NRA for all funds accumulated through the later of the effective date of the adoption date of the amendment changing the NRA to a later time. For example, for amounts already accumulated, amounts fully vest (if not before) at exactly age 65, and only new funds vest (if not before) at the later of age 65+5. For some plans, there might be additional protections, such as the NRA in a pension plan, where you would need to actuarially adjust (for example) for early (pre-NRA) payment for each part of the accrued benefit, i.e., the part of the accrued benefit already accrued that is payable at the NRA of 65 and the part of the accrued benefit not yet accrued that will be adjusted from the NRA of 65+5. (This is not a complete list of potential issues.)

...Yes, I agree, but that loss of reliance is only because the dropped client is no longer a word-for-word adopter after that "special" amendment, not because the employer is a dropped employer. And only reliance is lost, not preapproved plan status, i.e., that employer gets to wait (though it is a bad idea) until Cycle 3 rolls around and restate onto a different provider's Cycle 3 document. The employer is not relegated to "true IDP" status under Rev Proc 2016-37 because the plan document, as drafted and adopted, was in fact a preapproved plan (and a word-for-word adopter) at the time of adoption. Had it remained an adopting employer, it would have retained reliance. An amendment to preapproved language made by a particular document provider to its own product is different than a required interim good-faith amendment for a change in law. I agree that only a document provider can provide that document provider's "corrective" amendment for its own document, and that any "document-correction" amendment that is adopted on behalf of all adopting employers covers only then-adopting employers of that document provider. However, an adopting employer of that plan can use any source of inspiration when drafting good-faith amendments to timely comply with a change in law (or a change integral with a change in law) because those amendments are not amendments to conform to changes in a preapproved plan's preapproved language, but are good-faith changes that come (more often than not) without reliance as they reflect changes that the IRS did not review yet (but are nonetheless required). Thus, I still don't see any authority that suggests that a good-faith amendment to update a plan for changes in law or guidance must come from a particular document provider, and I still conclude that they such an amendment can come from anywhere without losing reliance on pre-existing preapproved language (if the employer is still a word-for-word adopter) and without losing status as a preapproved document within the meaning of IRS Revenue Procedure 2016-37. But let's pretend I am wrong and that there is authority somewhere that such an amended plan does become a non-preapproved plan. Even that isn't the end of the world, since RP 2016-37 no longer requires a non-preapproved plan to be an "intended adopter" in order to adopt a preapproved plan (with that intention having been declared prior to 2016 via the now-obsolete Form 8905 that was used for that purpose prior to the end of the 5-year cycles). So, such a plan gets to go back onto a preapproved plan of its choice just as soon as it wants to, either now for PPA or later for Cycle 3. Arguably, its remedial amendment period doesn't end until the close of Cycle 3's restatement window, and so that hardship amendment that the employer acquired from Planet Nine, Inc. gets to be retroactively perfected at that time unless the amendment being perfected is not a good fit - which is why I suggested caution when shopping around. In fact, if the plan were to become a non-preapproved plan, then ironically, that delays the deadline for adopting required amendments (there's a 2-year lag under IRS RP 2016-37), so maybe the employer prefers to be a non-preapproved plan until a Cycle 3 document becomes available, so that it has a longer time frame for adopting a hardship amendment than if it were to retain preapproved plan status. Just a thought.

I agree with you up to the point where you say (for that client, or otherwise). There is a very big difference between an adopting employer that is "dropped" by a sponsor (or a sponsor that is dropped by an adopting employer) and an adopting employer of an abandoned plan. The Procedure does NOT describe the situation that you describe (unless you can find it, because I cannot). In the absence of language in the Procedure that covers a situation of less-than-complete abandonment, I see no loss of reliance (under the previously quoted text in my previous response), nor the loss of preapproved status, which occurs only when a document provider completely abandons its preapproved plan, i.e., it abandons every adopting employer, in which case it has the obligation to warn employers that they do (indeed) lose preapproved status (unless the timely adopt another preapproved plan). "SECTION 10. ABANDONED PLANS .01 Notification to the Service - A sponsor must notify EP Rulings and Agreements in writing if an approved M&P plan is no longer used by any employer and the sponsor no longer intends to offer the plan for adoption. Such written notification must be sent to the address in section 20 and must refer to the file folder number appearing on the latest opinion letter issued. .02 Notification to Employers - A sponsor that intends to abandon an approved M&P plan that is in use by any adopting employer must inform each adopting employer that the form of the plan has been terminated, and that the employer's plan will become an individually designed plan (unless the employer adopts another pre-approved plan). After so informing all adopting employers, the sponsor should notify EP Rulings and Agreements in accordance with subsection 10.01 above. " Thus, if the preapproved plan has not been abandoned as described above, I still don't see the loss of preapproved status because the relationship is broken between the document provider and the employer (nor the loss of reliance if the adopting employer is still a word-for-word adopter of that still-preapproved non-abandoned plan).

Rev Proc 2011-49 (PPA) Section 19.03 Other Limitations and Conditions on Reliance - The following conditions and limitations apply with respect to both M&P and VS plans: (1) An adopting employer can rely on a favorable opinion or advisory letter for a plan that amends or restates a plan of the employer only if the plan that is being amended or restated was qualified. (2) An adopting employer has no reliance if the employer’s adoption of the plan precedes the issuance of an opinion or advisory letter for the plan. (3) An adopting employer can rely on an opinion or advisory letter only if the requirements of this section 19 are met, and the employer’s plan is identical to an approved M&P or specimen plan with a currently valid favorable opinion or advisory letter; that is, the employer has not added any terms to the approved M&P or VS plan and has not modified or deleted any terms of the plan other than choosing options permitted under the plan or, in the case of an M&P plan, amended the document as permitted under section 5.06 or 5.09 or, in the case of a VS plan, modified the document as permitted under sections 14 and 15. Thus, for example, in the case of a VS plan, the employer’s plan must be identical to the approved specimen plan except as the result of the employer’s selection among options that are permitted under the terms of the approved specimen plan and modifications permitted under sections 14 and 15. For purposes of this section 19.03(3), a plan will not fail to be identical to an approved M&P or specimen plan if: (a) the employer modifies or amends the plan to add or change a provision and/or to specify or change the effective date of a provision, provided the employer is permitted to make the modification or amendment under the terms of the approved M&P or specimen plan as well as under § 401(a) or 403(a), and, except for the effective date, the provision is identical to a provision in the approved plan; (b) the employer, sponsor or practitioner adopts an interim or discretionary amendment in accordance with section 21 or Rev. Proc. 2007-44; or (c) the employer adopts a model or sample amendment that the Service has indicated will not cause the plan to be treated as an individually designed plan. For example, an employer is not required to restate its M&P or VS plan in order to change options under the plan or to specify different effective dates. Also see section 5.02, which limits an employer’s ability to amend an M&P plan without causing the plan to be treated as an individually designed plan, and section 5.11, which requires the employer to complete a new signature page when the employer changes options in an M&P adoption agreement. An adopting employer cannot rely on an opinion or advisory letter if the adopting employer has modified the terms of the plan’s approved trust in a manner that would cause the plan to fail to be qualified under § 401(a). .04 Reliance Equivalent to Determination Letter - If an employer can rely on a favorable opinion or advisory letter pursuant to this section, the opinion or advisory letter shall be equivalent to a favorable determination letter. For example, the favorable opinion or advisory letter shall be treated as a favorable determination letter for purposes of section 21 of Rev. Proc. 2011-6, regarding the effect of a determination letter, and section 5.01(4) of Rev. Proc. 2008-50, regarding the definition of “favorable letter” for purposes of EPCRS. Of course, the extent of the employer’s reliance may be limited, as provided in this section. * * * I see no requirement that an employer obtain those required interim (or discretionary) amendments from the entity that is on the Letter.

Section 7.07 of Revenue Procedure 2017-36: SECTION 7. TERMINATING PLANS Notwithstanding sections 5 and 6 of this revenue procedure, the termination of a plan ends the plan’s remedial amendment period and, thus, generally will shorten the remedial amendment period for the plan. Accordingly, any retroactive remedial plan amendments or other required plan amendments for a terminating plan (that is, plan amendments required to be adopted to reflect qualification requirements that apply as of the date of termination) must be adopted in connection with the plan termination regardless of whether such requirements are included on a Required Amendments List. Not only do you not have reliance on your DL, since that Letter presumed the plan was an ongoing plan (as compared to a Form 5310 submission), but you do not have "reliance" on any list published by the IRS, not even the 2019 List. If you restate to a PPA DB volume submitter plan, that plan was approved on the 2012 Cumulative List, i.e., that plan is seven years out-of-date on the date that you restate, which is a step backwards from what you currently have. Note: the Cumulative List is no longer applicable to non-preapproved plans, but as noted above, such plans are now governed, as ongoing plans, by the Required Amendments List applicable to non-preapproved plans. The 2019 list had a cut-off date. Any developments after the cut-off date are not on the list, but need to be reflected by the terminating plan. The RevProc excerpt above states that you are responsible for all changes in law, even if they are not on the latest Required Amendments List. The only way you have reliance is via a Form 5310 submission. The last day of the plan's last remedial amendment period is the formal date of its termination. Even then, you're good only for so long as assets are timely distributed within the meaning of Rev. Rul. 89-87 (which contains no safe harbor rule, it contains only an unsafe harbor rule, i.e., if it takes more than a year, the IRS presumes assets were not timely distributed, but if assets could have been distributed in a week, then they should have been distributed within a week). That's between you and the IRS on audit, based on the facts and circumstances. A plan that does not timely distribute assets will be treated by the IRS always having been an ongoing plan, which means, for one example, that any distribution that was made solely on account of the attempted plan termination might be considered by the IRS to constitute a qualification defect because there was no distributable event of plan termination in their view. It is quite possible that no amendment is required. Even so, you need to monitor all legal developments potentially affecting the plan since the List upon which the last DL was based through December 1, 2019, and adopt any amendments for those legal developments, including any developments that occur between now and 12/1/19 (if applicable to the plan), and then get the assets out of the plan ASAP after 12/1/19 IMHO.

Unless someone can point out Revenue Procedure language requiring an employer to commit to using only amendments prepared by the firm on the Letter, I don't see such a restriction. I generally see a loss of preapproved status only for the limited situations mentioned in the applicable Procedures. Suppose Henry has Advisor A who uses the XYZ document. Suppose Henry fires Advisor A and hires Advisor B, who also uses the XYZ document. Both Advisors receive the same hardship amendment from XYZ. Does Henry lose preapproved status because Henry uses the XYZ hardship amendment that was provided to Advisor B rather than the identical hardship amendment that XYZ provided to Advisor A? I think not. The source of the amendment is not a condition for maintenance of preapproved status. But Henry is no longer covered by Advisor A's "on behalf of all adopting employers" amendment, nor is Henry covered by Advisor B's "on behalf of all adopting employers" amendment until such time that Henry adopts Advisor B's plan. Until then, during that interim when there is no connection to the firm on any Letter for the document then in use, Henry must sign an employer-level hardship amendment (assuming Henry's plan is a K plan with hardship provisions). If the plan is audited, I predict that the IRS will not attempt to classify Henry's plan as having been so substantially modified as to lose preapproved plan status. If the plan submits a VCP application, I predict the IRS will find that the plan was "subject to a Favorable Letter." The wording of Henry's plan is the same as if he had not changed his Advisor. If this fact pattern results in the loss of preapproved status, I think there would be a commotion to urge the IRS to revise its guidance in order to prevent such a result.

You do not need to use a particular source for an amendment to maintain preapproved status. If the employer adopts a preapproved plan, it continues to have a preapproved plan for so long as it continues to be a word-for-word adopter of the document as reviewed by the IRS and approved via an IRS Letter to that Document Provider. Good-faith required interim amendments do not count against you, even if you write them yourself, since IRS Revenue Procedure 2011-49 requires "required" interim amendments as a condition of maintaining both qualified status and preapproved status, but without mentioning that such amendments need to come from the entity that received the IRS Letter. FWIW, losing preapproved status is much more drastic and much less common than losing reliance. (See below on reliance.) Modifications to preapproved language that are wholly unrelated to the content of required interim amendments are another matter, and could result in loss of preapproved status. It is often important to use The Document Provider's amendment because you have some comfort that the architect of the amendment has taken into account the particular language of that particular plan product, but maybe that is not an issue. For example, there's any number of different and acceptable ways to say that "the six-month suspension on deferrals no longer applies," and any variations on that theme will most likely get that particular task done. (I oversimplify, but you get the drift.) As Larry suggested, it might be better, though, to restate the plan to The Next Provider's document and then use That Provider's amendment. It might be better to use a particular source amendment so that it dovetails with an SMM, or a revised SPD, or a revised hardship distribution form from That Provider. It might be better to use a particular amendment because it will get mapped to the a particular Provider's Cycle 4 (not Cycle 3) document many years from now. It might be better for lots of reasons to use A Particular Provider's amendment (and it might be better to have all required interim amendments come from a common source), but it is not required. All that is required is for the employer to maintain qualified status via every required interim amendment, especially when it is not clear the employer is (still) covered by a particular Provider's "blanket" amendment. Except when the IRS so states (as when, typically, using IRS sample amendments), reliance does not typically occur until good-faith interim amendments are eventually incorporated into a timely adopted retroactive preapproved restatement for a particular remedial amendment period during the applicable 2-year restatement window. The only thing that is required until then is that each such amendment be complete enough, timely enough, and accurate enough to pass the IRS smell test for constituting a good-faith interim required amendment for that particular plan at that particular time for that particular reason. So, it would not look good if the employer adopts an amendment that clearly applies to a plan other than the plan purportedly being amended, such as because the amendment refers to numerous Plan Document Sections that do not appear in the employer's plan document. So, yes, if you are comfortable cutting corners, you can go find an amendment wherever you like, but someone should be evaluating how suitable each such "available" amendment is for that particular plan for that particular reason for that particular time. The hardship amendment does more than suspend deferrals and expand potential sources. The amendment fundamentally changes how hardship determinations are to be implemented under new regulatory provisions, so caution is recommended in determining the trustworthiness of the source for the hardship amendment.

The 2013 Edition of ASPPA's ERISA Outline Book disagrees, as does the terms of some preapproved plans that I use. Since I can't expect everyone to have the 2013 hard copy edition of EOB in front of the them, it should still be in Chapter 3A, Section II, in a Part called "Forfeitures - using forfeitures to provide additional allocations to participants." Example 2.b. "Example - money purchase plan..." On the next page in that 2013 EOB section, it states that the "safe harbor" rules for nondiscrimination testing require target benefit plans to use forfeitures to reduce contributions. See 1.401(a)(4)-8(b)(3)(i)(B). As a result, few target benefit plans will treat forfeitures as additional employer contributions because most target benefit plans are designed to comply with the safe harbor rules." I conclude that even a target plan may do so if it is willing to do A4 testing. EOB goes on to say: "Historical Note: Prior to 1986, IRC Section 401(a)(8) prohibited a MP or target benefit plan from treating forfeitures as additional employer contributions. ...TRA'86 amended IRC 401(a)(8) to limit that rule to defined benefit plans." I conclude that it has been permissible to reallocate forfeitures in any MP plan since TRA'86, since IRC 401(a)(8) continues to contain only a prohibition against reallocating forfeitures only to DB plans.

QDIAs have not been required for EACAs some time now. See, e.g., bottom of page 7 of the following, : https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/publications/automatic-enrollment-401k-plans-for-small-businesses.pdf Also, don't look at anything published before 2009 - as yes, the internet is cluttered with pages saying that a QDIA is necessary. I see PPA preapproved plans that have EACAs but not a QDIA requirement. I don't recall the history, but this explains why I had trouble finding a cite - I guess it was from the QDIA side (DOL jurisdiction) that the link between EACAs and QDIAs once existed.

At one time you could not. My recollection is that the IRS issued the Ruling subsequent to a statutory or regulatory change made during the GUST remedial amendment period, and that the Ruling covered all MP plans, not just target plans. My cryptic personal cheat sheet suggests a strong possibility that the authority is likely to be RevRul 2002-42, but I can't guarantee it. (If the Ruling was before that one, then that one should mention it in passing in the "background" section of 2002-42.) I forget what the underlying broader change was, but forfeitures went along for the ride (as did, I believe, mergers of MP plans into PS plans).

Anyone: Please tell me why a QACA - any QACA - does not automatically comply with the requirements for being a EACA. Disregard cosmetic issues like the EACA provisions call for a "EACA notice" and the QACA provisions call for a "QACA" notice. Yes, I know that only a EACA can have a refund feature, but tell me why a QACA fails to qualify for having a refund feature. If you cannot, then separate notices would end up saying the same thing, regardless of their name, so why not have one combined notice? It's true, escalation must start no lower than 3% for a QACA (if there is escalation), but that doesn't violate the EACA rules. Ditto the 10% maximum on escalated deferrals - that doesn't violate the EACA rules. The boilerplate regulatory uniformity requirements look the same to me for both a EACA and a QACA. The character of the automatic contributions as "safe harbor" contributions, and the minimum amount of such contributions for a QACA, all those things do not violate the EACA requirements. A QACA safe harbor notice will comply with the EACA notice rules, unless you can point out to me where I err. (None of this applies if the plan has a "maybe" QACA, which is not a QACA until the midyear amendment amends the plan into a definite QACA. My question deals with a plan that has a QACA on the first and every remining day of the plan year.) As you might have guessed, I think that the "pairing" of "EACA and QACA" is to make drafters comfortable with having a refund feature, but that such pairing is not technically necessary. But I am open to the possibility that I am overlooking something.

For NON safe harbor contributions, it all depends. For matching contributions other than ACP safe harbor matching contributions, you need to pass the ACP requirement stated in the document using a 414(s)-compliant definition (the document should so state). If the plan states you have an ACP safe harbor (which you can have only if the plan so states), then you cannot have an ACP safe harbor unless you have an ADP safe harbor, so the ADP safe harbor needs to exist (and be corrected, if applicable) before you can comply with the plan's specification that the ACP safe harbor is to be used for meeting the ACP requirements. If the plan states you must pass an ACP test, then the document is likely to say you need to use a definition of compensation that complies with 414(s) for that ACP test. To summarize, there is no such thing as a general test for any type of matching contribution, as nondiscrimination is shown by satisfying the plan's stated method of meeting the ADP/ACP requirements. I believe the 401k/401m regulations say that the ADP/ACP test (or test equivalents, such as a safe harbor) is the exclusive method of testing for discrimination. Nonelective contributions is another matter. If nonelective contributions (that are based on a non-414(s)-compliant definition of compensation) pass the general test (presumably on a contributions basis) using a definition of compensation that is 414(s)-compliant, then you are good to go. Otherwise, you need to do a corrective retroactive amendment described at Regulation 1.401(a)(4)-11(g), and I leave it to you to figure out what the content of the amendment should be. (That regulation, incidentally, is also your authority for changing compensation retroactively to correct the ADP safe harbor failure if the document doesn't have a 414(s) fail-safe for the ADP safe harbor.)

Agreed, the issue that Doghouse is worried about is that an employer cannot implement initial pretax elective deferrals until the document is adopted. Once you have pretax deferrals implemented, then you can add Roth retroactively (to an earlier point in that plan year) as a discretionary amendment (but not to a time before the plan timely implemented pretax deferrals, because Roth can only exist as a feature if pretax exists as a feature). If, though, the plan is an ADP safe harbor plan, I would hesitate to add Roth retroactively without considering what IRS Notice 2016-16 might require by way of a "timely" revision to the safe harbor notice, i.e., maybe you can't do so retroactively.

Since there are still at least two followers to this thread (the email containing this link was marked as unread, so I just now read it), I advise you to plan on IRS approval of all providers' DC Cycle 3 documents occurring on a uniform date in 2020, but I cannot be more precise.

Idr - this has been one of the most informative and, frankly, the most fascinating thread I've seen on this forum (though I am relatively new). I really do hope you choose to stay in the forum and not leave it as you stated you were thinking of doing early on. So many questioners might not have hung in there when initially feeling quite disappointed. I seldom see the original questioner continue to be so engaged in the process, thus making this thread a great resource for others to find in their future electronic searches for information about the QDRO process and the twists and turns inherent with the topic. Bravo to you (and to all those who contributed).

I agree with everyone who posits that RMDs are never optional, which is why the R stands for Required. The question is: Is the distribution being characterized as “required” by reference to the plan’s language enforcing the Code or is it “required” by some plan provision other than the plan’s language enforcing the Code? If I understand the original question correctly (the identification of which seems to have become the primary topic), the law does not require RMDs simply because a participant chooses to withdraw funds from a plan after attaining age 70½, though the plan might do so just because its designer thought it was a great idea. The law’s only “trigger” is either age alone (i.e. age 70½ for everyone if the plan still uses the pre-SBJPA provision), or (for a plan that uses the post-SBJPA provision) a combination of age, ownership status, and employment status. Only distributions mandated by the Code are “true” RMDs. For example, such amounts are automatically not eligible for rollover if they are required by the Code. In contrast, if the distributions are required only because the plan is fabricating “pretend” RMDs as described below, then such distributions would not be required by the Code and such amounts could not (for example) therefore be automatically characterized as ineligible for rollover. Only amounts being distributed in enforcement of 401(a)(9) can automatically be characterized as ineligible for rollover by reason of their being required by the Code. A plan can require (or permit) minimum distributions that are not intended to reflect the requirements of 401(a)(9). For example, a plan can offer or require a series of payments that are to be determined in an identical manner to the Code’s formula for determining RMDs (i.e., over life expectancy). But in that case, if such amount is being paid prior to the Code-required Required Beginning Date (RBD), such series of payments are not Code-required RMDs until the participant reaches the Code-described RBD (which should be stated in the plan). In response to what I view as having been a digression, if amounts are being paid in addition to true RMDs, then such amounts are not triggers for anything other than bigger debits to the participants account balance and the possibility of making a rollover. For example, if the plan’s only provisions relating to age 70½ are those that are intended to reflect the post-SBJPA provisions of 401(a)(9), then there is no such thing as an in-service distribution to a non-owner that exceeds the RMD unless you characterize the entire amount of such distribution as being in excess of the $0 RMD. There can be an amount in excess of a Code-required RMD only if there is a Code-required RMD, and there can be a Code-required RMD only if the participant is described by the plan’s provisions enforcing the Code’s post-SBJPA definition of the RBD. The Code’s post-SBJPA RBD is never triggered by the presence of a distribution (voluntary or otherwise), but only by the combination of age, employment status, and ownership status. Thus, for example, participants can never elect to receive true RMDs early. They might be permitted or required to receive amounts that are determined in exactly the same manner as RMDs, and perhaps the feature is tied to attainment of age 70½, but until the participant has attained the “true” RBD for purpose of the plan’s enforcement of 401(a)(9) (which does not occur until severance from service for non-owners under plans with post-SBJPA provisions), such amounts are not RMDs within the meaning of IRC 401(a)((9) because they are not yet required by 401(a)(9), and the record keeper must account for “pretend” RMDs differently than for “true” RMDs. No plan is required to have annual required minimum distributions other than those required by the Code, and many plans do not. It is worth examining each plan to see how it is constructed. In summary, a document could have a provision that triggers something that can be characterized as being "required minimum distributions," but to answer the original question as I understand it, such required minimum distributions would not be the same thing as 401(a)(9) RMDs because the Code does not use the fact that a distribution has been made as a trigger for determining a participant’s RBD. The Code’s RMD requirements use the Code’s definition of RBD, and a non-owner will not reach that RBD until they stop working as an employee of the employer sponsoring the plan if that plan uses the post-SBJPA definition of RBD. The former ("minimum required distributions) is typically going to be controlled by an AA option, while the latter (401(a)(9) RMDs) will hopefully be found in every plan and hopefully will explicitly refer to IRC 401(a)(9) and will have the appropriate RBD for Code purposes. The plan administrator needs to correctly identify which type of required minimum distribution is being paid. I could understand a plan having a distribution serve as a trigger for ordinary required minimum distributions in order to prevent numerous ad-hoc distributions being requested while in-service (or even after termination). If amending a plan with ad-hoc distributions to provide for such a trigger, beware of IRC 411(d)(6).

CuseFan is correct with respect to many plans’ provision for the commencement of benefits in that situation (which has been true for many plans since the amendment for final 415 regulations). See also: <https://benefitslink.com/boards/index.php?/topic/63716-415-limits-distributions-while-still-employed/> The regulation cited by the first responder in the above link reads as follows: (7)Effect on other requirements. Except as provided in § 1.417(e)-1(d)(1), the application of section 415 does not relieve a plan from the obligation to satisfy other applicable qualification requirements. Accordingly, the terms of the plan must provide for the plan to satisfy section 415 as well as all other applicable requirements. For example, if a defined benefit plan has a normal retirement age of 62, and if a participant's benefit remains unchanged between the ages of 62 and 65 because of the application of the section 415(b)(1)(A) dollar limit, the plan satisfies the requirements of section 411 only if the plan either commences distribution of the participant's benefit at normal retirement age (without regard to severance from employment) or provides for a suspension of benefits at normal retirement age that satisfies the requirements of section 411(a)(3)(B) and 29 CFR 2530.203-3. Similarly, if the increase to a participant's benefit under a defined benefit plan in a year after the participant has attained normal retirement age is less than the actuarial increase to the participant's previously accrued benefit because of the application of the section 415(b)(1)(B) compensation limitation (which is not adjusted for commencement after age 65), the plan satisfies the requirements of section 411 only if the plan either commences distribution of the participant's benefit at normal retirement age (without regard to severance from employment) or provides for a suspension of benefits at normal retirement age that satisfies the requirements of section 411(a)(3)(B) and 29 CFR 2530.203-3.

Don't take this response personally, I am just pontificating at the public square. Suppose Harry goes to a lawyer and does everything proper to leave all his assets to his eldest son upon his death. Harry dies, and the executor gives Harry's assets to Harry's ex-spouse instead. Do you see a potential problem with that, and if so why? When it is okay to ignore the provisions of a will? I don't know, but I can imagine there are circumstances that would permit it, but unless you can find that greater authority, then what is the point in making the will in the first place if people don't have faith in the notion that the terms of the will be carried out (absent superseding law)? It would neither surprise me nor trouble me if there is no statute or regulation saying that the terms of wills must be carried out. Even so, I still am willing to pay a lawyer to write a will because I believe a court will feel compelled to carry out my wishes if it is asked to do so by someone who is named in my will and if the conveyance to that named person is otherwise lawful. When an employer signs a plan document, the employer is setting down their intent in plain sight. A participant can sue the employer for failing to follow the intent stated in the document if they can show they are harmed, yes? It seems to me that participants have successfully done so. In my opinion, it doesn't matter if the plan provision at issue has anything to do with a legal or qualification requirement. The document says that forfeitures are allocated pro-rata on deferrals as an additional match, and the employer uses them instead for some other lawful purpose that could have been, but wasn't, put into the document, such as reducing the profit sharing contribution. I really don't think the government (or private) audit will go well from the employer's perspective. The document is the governing body. It's the "constitution," the bill of rights, the law of the land for that particular set of plan participants. In contrast, if the document says that the employer can reduce contributions or allocate to participants or some combination of both, then the employer in my example won't get in trouble for using all the forfeitures to reduce the profit sharing contribution because the document gives the employer the authority to exercise a certain amount of discretion in determining what to do with the forfeitures. If the employer signed the document, then what makes a retirement plan less compulsory in is language than a will? If employers can ignore the terms of a document (even if complying with the Code as they do so), how does one determine what rights and obligations the employer and employees have? Do participants have a right to a match if forfeitures must be used to fund a match according to the document? There is no legal requirement that forfeitures must be used to provide a match, but the employer chose to sign a document giving participants that right. Words and signatures matter. And yes, personally, I'd very much appreciate having someone find a citation to the rule that the terms of the document must be followed, but I would not hesitate to tell employers that the terms of the document must be followed. (Decades ago, I saw a cartoon with the caption for an IRS supervisor telling the newbie IRS agent "Just because you don't understand it, and I can't explain it, doesn't mean we can't enforce it.")

The prior commentators make good points. FYI, the 401(k) hardship rules are not limited (by law) to only in-service distributions. So, if a 401(k) plan document’s hardship provision is not limited to just in-service distributions, then a participant who has met the requirements for a hardship distribution would be entitled to a post-termination hardship distribution (of just the hardship amount) at any time before being entitled to receive the plan’s termination-of-employment benefits (imagine, for example, a plan that pays out only upon termination only upon attainment of NRA). For plans with immediate cash-outs upon termination, the question theoretically should not arise, but it sometimes does, depending on the plan design. Imagine that the plan provides only for lump sums upon termination, the amount payable upon termination exceeds the involuntary cash-out threshold (i.e., participant consent required), and the participant doesn’t want to take out all the money, so they ask for a hardship distribution. If the hardship is genuine (relative to the plan’s provisions) and the plan does not limit hardships to only distributions prior to termination, then the hardship amount should be paid post-termination. The reason most people think that hardship distributions are only for in-service distributions is because hardship is (probably) the most significant exception to the rule against in-service distributions of deferrals prior to age 59 ½. So, in most administers’ experience, hardship distributions tend to be in-service distributions, especially when plans pay out all benefits upon termination soon after termination, and especially when the plan is a 401(k) plan (i.e., the failure to have attained age 59 ½ is pertinent). But a document provider is certainly free to provide documents that limit hardships to only those hardships occurring prior to termination (or documents that contain an option in that regard). The 401(k) hardship rules apply only to the 401(k) component of the plan, but as a practical matter, many plan documents contain the same hardship rules for the non-401(k) accounts as for the 401(k) accounts. But not necessarily. Profit sharing funds may be distributed on account of a stated event, and one of those stated events can be hardship using some other definition of hardship. (Just saying.) So, regardless of the document provider, a close examination of the plan document is required before you know when hardship distributions can be paid and whether it makes sense to do so (you would generally not want to do so if the funds can be paid out at the same time for some other reason, such as when such funds can be paid either under the plan's in-service distribution provisions or under the employment-termination provisions).

IMHO, the cessation of contributions (even if permanent) is not a de facto termination. That is why preapproved plans frequently contain an option to maintain any type of plan as a frozen plan, i.e., the plan that precludes new entrants and further contributions (or accruals). I would agree that the distribution of the last dollar of plan assets is potentially a de facto termination. A plan that has permanently ceased contributions is often called a "wasting trust" and as such, continues to be an ongoing plan that must continue to be administered and updated as an ongoing plan and continue to make distributions to participants, for example, only upon distributable events as defined by the plan (such as retirement). The permanent cessation of contributions (whether declared by the employer or by the IRS) to a profit sharing plan is a de facto vesting event. The document usually has provisions built in with regard to the vesting. If the owner wants to keep the money in the plan, then the employer has all the duties and fiduciary obligations of maintaining a qualified plan, and is expected to wear the fiduciary hat whenever appropriate, such as ensuring that all required interim amendments for ongoing plans are timely adopted and that the trust provisions are being carried out in a prudent manner (and the owner or someone needs to be a trustee). Since the withdrawal of all plan assets might constitute a de facto termination, the employer should act with caution before doing so (as a plan termination can accelerate the deadline for required interim amendments). The owner should be getting lots of good advice and making a decision one way or the other as soon as possible.

ACK: Thank you for the clarification. I agree with you that if this is an asset sale, and if as the result of the asset sale there are employees previously employed by the seller who are being hired by an unrelated buyer, then there is no service that is required to be "carried over" to the buyer. I did not get that impression, however, that this is an asset sale. Like Luke Bailey, I inferred that this was a stock transaction. There was no mention of any seller of any assets, nor any mention of employees previously employed by seller who were to become employees of the buyer as a result of the transaction. Instead, there was a new entity being formed where previously (apparently) there was none. (We do not know much about the physician at Company B.) It is quite possible that some assets were the subject of conversation, but the overall business objective in the original question appeared to be that the old and the new entity each wanted to make sure that all employees of either entity would be credited with service under a common plan, or at least that Company B's employees would have their service with Company B recognized under Company A's plan. In an asset acquisition between otherwise unrelated parties, it is unlikely that both buyer and seller intend to share a plan, much less grant predecessor service to each other, as generally each party to an asset sale wants to go their own way afterwards (which is why stock sales are unattractive to parties with those intentions). All of these facts suggested to me that this was a stock transaction, but I acknowledge I could have so stated.

Towanda, you are correct, a match cannot be both fixed and discretionary, and what’s more, regardless of how the AA was completed, and regardless of whether the match is fixed or discretionary, the document does not have a document error solely because the employer or drafter intended one thing but the AA, as completed, says another thing. That is a “drafting” error, and as such, is not the subject of any correction program such as EPCRS. The term you may be looking for is a scrivener's error, but that is a whole other can of worms way beyond your simple question. A document error is typically reserved for the situation when the document fails to adhere to legal requirements, such as when, for example, the plan is out of date (e.g., required interim amendments have been missed) or the employer or drafter selected conflicting provisions or failed to provide all required specifications. In contrast, an operational error would arise if the employer fails to administer the plan in accordance with the AA, such as failing to contribute any match that is required to be made each year under the terms of any selected AA option that so states. I can imagine an AA option that would say "a discretionary contribution, which, if made, shall always be X% of the first Z% deferred," which I gather is what was intended here. But most providers don't provide that option because it is probably not in high demand. If the AA had an option for filling in a blank to describe the matching formula, then that might have been an appropriate place to make such a statement. Most employers are content with a "discretionary" amount as a percentage of deferrals, typically with a "discretionary" cap on deferrals, and that combination would have been sufficient to enable this employer to choose between no match and, only if the employer wanted to, a match of 100% of the first 3% deferred.

Except for the potential application of the rule of parity, all past service with B automatically counts, at least for eligibility, the moment that B adopts the plan. I would argue that service with any related company must also be similarly counted for eligibility since related employers are treated as a single employer (IRC 414(b), 414(c), and 414(m)). Even for unrelated employers, IRS sample plan language provides “For purposes of plan participation and vesting, the adopting employer and all participating employers shall be considered a single employer. An employee’s service includes all service with the adopting employer or any participating employer (or with any employer aggregated with the adopting or participating employer under §414(b), (c), (m), or (o)). An employee who discontinues service with a participating employer but then resumes service with another participating employer shall not be considered to have severed employment.” In other words, not only are related companies treated as a single employer, but even for a MEP, all adopting employer are treated as a single entity for the stated purposes. Even if these companies are neither a controlled group nor an affiliated service group, the IRS does not limit its analysis to only the presentation of the sample language excerpted above. The directions to the IRS agent reviewing a preapproved specimen plan reads as follows: “The exclusive benefit requirement is applied to a multiple employer plan by treating all employees of all participating employers as if they were the employees of the same employer. In addition, the minimum participation requirements of § 410(a) and the minimum vesting requirements of § 411 are applied as if all participating employers were a single employer, and service for any employer counts as service for all.” Thus, in my view, the granting of predecessor service should be limited to only those situations where such service is not already required to be counted, such as when the employer wants to grant service with named employers that are neither an adopting employer nor a “related” employer within the meaning of 414(b), (c), or (m). Otherwise, employers and their advisors may be more likely to infer that such service would not otherwise be required to be taken into account, and thus lose sight of the fact that such a design option exists as a means to make a discretionary grant of service. (By "named" companies, I do not suggest that each such company must be individually named, but only that the companies can be readily identified (as if by name).) The only service that I believe can be excluded for eligibility purposes would be using the rule of parity, and then only when the plan document contains that rule. For vesting, the rule of parity might apply, and there is also usually an option, for example, to exclude service prior to the existence of the plan or any predecessor plan (as defined for purposes of IRC Section 411). Finally, the 415 regulations provide many rules relating to predecessor service. Even if these companies do not constitute a controlled group (or if ever cease to be a controlled group), the facts strongly suggest the potential existence of an affiliated service group. But even if the companies are unrelated, I urge you to consider that it is probably unnecessary, and perhaps not good practice, to name "predecessor employers" if such companies would need to be treated as a predecessor employer either by law or by the terms of the plan. The IRS takes the position that even unrelated employers must give service credit to other adopting employers. Thus, in general, I would turn your question around by saying that there is a presumption that all service counts for most purposes for these two employers unless you find an exception under the law and under the terms of the plan, and elect such exception, such as the rule of parity, to name one.

An IRS Notice must yield to any [Treasury] regulation to the contrary (except when the IRS is exercising authority granted to it by a regulation, such as when granting limited administrative 411(d)(6) relief in circumstances described by a regulation). Notice 2016-16 states in a couple places that nothing in that Notice contravenes anything in the 401(k) safe harbor regulation (perhaps only in footnotes, but it is in there somewhere). So, if the regulation were to prohibit such an expansion, then the Notice's silence in that context could not be viewed (IMHO) as giving permission.Thus, I would not rule out examining the regulation first and then proceeding to the Notice. Under the regulation, HCEs do not need to be in the ADH SH component of the plan in order for the plan to meet the ADP requirements via an ADP safe harbor, so arguably choosing to expand the group entitled to that type of contribution would include the ability to adopt a midyear amendment to include HCEs. Such contributions would go into the plan's "safe harbor account" and thus be fully vested. Regulation 1.401(k)-3 explicitly acknowledges that HCEs can be in the overall ADP SH arrangement. So despite taking another path, I get to the same destination expressed above. As noted by JackS, some [preapproved] plans go so far as to exclude HCEs on the AA at the outset, but contain an operational add-back (either on the AA or in the BPD), meaning the employer can choose to include the HCEs at some later time without an amendment. This supports the theory that the proposed midyear amendment would be acceptable (and unnecessary if the plan so states). The reverse, though, would not work since the promise of an ADP SH to an HCE at the outset would be a 411(d)(6) protected benefit for the HCE, and the employer could not operationally choose not to fund a promised ADP SH contribution to HCEs except on a prospective basis. (Perhaps the 30-day notice would also be required even if only HCEs were affected by a midyear amendment to reduce or cease ADP SH contributions, but since that question is not being posed, I decline to form an opinion on that.)

An IRS Revenue Procedure cannot supersede a Treasury regulation, since the IRS reports to the Treasury and a Treasury regulation has more clout than an IRS Procedure. However, the IRS might, as a policy matter, allow self-correction via amendment, as it has just done (it did so under the previous Procedure as well). Even so, under the latest EPCRS Procedure, three conditions must be met, one of which is that the (uniform) retroactive increase in a benefit, right, or feature must be otherwise permitted “under the Code” (which most practitioners would conclude means compliance with any Treasury regulation interpreting the Code). So, no, this Procedure does not waive any requirements for an amendment to reduce or eliminate a benefit, right, or feature, such as the 30-day notice of any amendment that reduces or eliminates an otherwise required ADP safe harbor contribution, and any such midyear amendment must also meet the other conditions of Regulation 1.401(k)-3. Likewise, this latest Procedure does not allow the retroactive adoption of an ADP safe harbor (other than a plan that has reserved the right to install a nonelective safe harbor midyear by having issued a “maybe” notice, as authorized by that regulation), since that increase (ADP safe harbor status) would violate the same regulation (i.e., there must be a notice distributed prior to the start of the plan year). In other words, one way or another, an advance notice is required to adopt, change, or end an ADP safe harbor (with a couple very limited exceptions to the notice requirement in the context of some but not all plan terminations). Similarly, the new Procedure does not authorize a plan to adopt a retroactive amendment permitting deferrals, since the Code states that no deferrals can be taken from pay before the provision is adopted allowing for deferrals. In contrast, the only reason that an employer previously could not adopt a loan feature retroactively to a prior plan year (that I can think of at the moment) is an IRS policy that states that discretionary amendments must be adopted no later than the last day of the plan year of implementation. The IRS position is that the terms of the document must be followed, and employers can’t have complete freedom to disregard the terms of the plan, but the IRS did allow a little bit of flexibility, i.e., until the end of the plan year, but even so, even that is permissible only so long as no other rule is violated. Remember IRS Notice 2016-16? That was the Notice allowing for additional mid-year changes to an ADP safe harbor plan. Even so, it went out of its way to make clear it was not overruling any previous regulatory guidance. That Notice merely revised previous IRS administrative guidance (much of which was word-of-mouth) to acknowledge that the IRS had previously made statements that were unnecessarily restrictive, and that official guidance prior to that Notice was quite murky, and so the IRS provided additional clarity on such matters so that employers and the IRS itself would not dwell on many matters that had previously existed in the underworld of the “dreaded and evil” midyear prohibition on amendments. Again, no regulatory requirement was affected by that Notice, rather, it was just a new and welcome enforcement posture by the IRS, as is the latest EPCRS Procedure. Enforcement on the timing of a certain type of amendment is now being made more liberal, but it is still a narrow passageway through which you must pass, i.e., you can stay in the park after the park has closed for the day without getting a ticket, but you can’t cause any other trouble, like littering or disturbing the peace, as you will most definitely are at risk of getting a ticket for any such shenanigans.