Ken Marblestone

It shouldn't be too difficult to amend the plan to include non-"safe harbor" reasons for hardship distributions. We typically use a catch-all provision such as "Other catastrophic circumstances."

And never use the word backdate; that implies you are doing something illegal. You are establishing a plan witn a retroactive effective date.

If the plan is kept around, there's also the continuing necessity of restating and adopting such amendments as may be required.

Two of our clients received these notices, both dated February 13. One is for 2019 and one is for 2012 (a year in which there were no distributions at all from this plan)!

Peter, I think that would depend upon the agreement with the TPA or other document provider. We typically do not charge a fee for routine amendments such as this.

Query: could a new plan be adopted on or after 2/20/22 and be made retroactive to 2021 at that time for purposes of making a 2021 profit sharing contribution? Clearly, the plan did not exist within the 12 month period. I don't know the answer, but I think a good argument can be made that you can.

If the money was rolled over into the new plan, you have a violation of the successor plan rule because there was no distributable event. However, if the trustee of the old plan was directed by the company to transfer the money directly into the new plan, there was no violation because there was no distribution. You should check the paperwork in connection with the rollover. As far as coverage/discrimination, which was your original question, the new hire is statutorily excludable, so I don't have a problem with the contribution to the old plan as long as the owner was not statutorily excludable as well.

Assuming there's no predecessor plan, you might exclude years prior to the existence of the plan for vesting purposes. Though the terminated participants might get 2020 allocations (and you might want them to, depending on demographics), they would be 0% vested.

sam248, you should also be applauded for your apparent willingness to "do the right thing". I'm sure that most of us on this Board have experienced similar situations from the Plan side, where participants who were mistakenly overpaid resisted returning these funds to the Plan, resulting in unnecessary time, expense and misery for everyone involved in attempting to recover the overpayment.

Am I missing something here? If no safe harbor has been elected yet for the plan year, there's no safe harbor to reduce or cease midyear. If 3% contributions have been made on a payroll basis without a SH notice and they stop mid-year, that's just a profit sharing contribution, which presumably satisfies the plan's profit sharing formula, or the formula can be amended to do so.

Don't you have to determine whether the participant is fully vested in the PS source? If so, it should not make a difference. If not, how can you make this without going back and tracking balances?

If anybody can get this for you, Peter Gulia can. He used to be in-house counsel for CitiStreet.

Peter, you state that the plans have no problem with coverage. If that means that each plan in the group satisfies coverage requirements on its own, wouldn't that mean that the plans would each satisfy nondiscrimination requirements with respect to the availability of hardship distributions?

Not unless B agrees to transfer sponsorship; the plan doesn't come along in an asset sale.

If A bought B in an asset sale, is A allowed to assume the plan if it wants too? In the same fashion Bill describes? Not unless B agrees to transfer sponsorship; the plan doesn't come along in an asst sale.