PS

so, since the client has received it so this is something they would have received for the 401k service that we provide?

Hi, Good Morning! One of the plan is terminating due to stock acquisition and the term date and sale date happens to be the same date 01/2022, however there has been contribution (employees) coming into the plan until 03/2022. As per their counsel this is not a successor plan and they have filed for VCP, also the acquiring company is part of a controlled group and they counsel has also stated a consent to terminate the plan was adopted BEFORE closing and before the entity became part of a controlled group with other entities. Couple of things. Participants from the terminating plan will not be moving into the acquiring plan. Instead they are moving to a new 401k plan that will be set up by using the same EIN. They could wait to transfer amounts from the old plan to the new plan until the IRS has responded to the VCP filing However, there’s no guarantee of that. If it takes longer than that, they would reevaluate As per they counsel the plan was terminated BEFORE closing. The options for distributions/transfers will be different for pre-closing contributions and earnings versus post-closing contributions and earnings. Counsel has stated Contributions and earnings for pre-closing payroll period: Participants must be given the right to take a distribution of their accounts for pre-closing contributions and earnings. They will be offered the option to have these amounts transferred/rolled over to the new plan. Contributions and earnings for post-closing pay periods: These should not be distributed. Post-closing contributions and earnings would be transferred automatically to the new plan (if approved by the IRS). I've handled successor plan previously however this is something completely new, this is something doable? Will there not be a successor plan situation? Thanks

is it more to do with a Non-Qualified plan, since my client was wondering why a 1099-NEC got triggered for a 401k ( qualified plan).

Thank you!

Hi, I've not come across 1099-NEC form, can anyone provide me little detail on this and how this is applicable for a 401k plan ( Plan Termination). Thanks

Yes, I agree! I will have the plan sponsor get a second opinion. Thank you.

Yes, the they have sent in a written letter and the counsel is also sending a opinion letter stating why they feel it is within the law. Since we are only the record keeper a letter from counsel and plan sponsor should HOLD good I guess.

Hi, One of the plan is terminating since the company is closing. The balance in the forfeiture is $843,650.03 this is a huge balance and as per the plan sponsor they discussed with their counsel and the counsel has advised to return the funds to the company ( employer). The owner and was never involved with the administration of the plan and the person who was handling it is no longer with the company, the owner is the only one left and wants to close the plan since the company is closing. The huge amount is because there were participants who had forfeited the funds since 2014, however no part forfeited the unvested amount during the plan termination since the plan was made 100% vested as of the term date 01/31/2022. The funds seemed to have just accumulated which is a operation defect. There are no forfeited checks No outstanding checks The forfeiture in the forfeiture in only the employer match The plan sponsor and they counsel have advised to return the funds to the company, I've never seen just huge amount in a forfeiture and since they are asking to return the funds is it something doable? is there any exceptional clause (IRS) since they have submitted the letter from counsel is there anything that we will need to look into/consider from compliance perspective? Thanks

Thank you!

They want to move to a different record keeper.

Hi, Plan sponsor wants to terminate the profit sharing plan and wants to set up a traditional 401k plan may be within 12 months time, I believe they will still need to complete the 12 months waiting period post the last distribution and then set up a 401k plan. If they set up a traditional 401k plan within 12 months time this will still lead to successor plan? Thanks

Thank you!

I don't believe there is any unvested amount the plan sponsor did not want them to be 100% vested since they had terminated 6-10 years ago, since there was a 5 consecutive one-year in break they will not be 100% vested correct.

Thank you!

Hi, one of the Terminating plans has few part who were terminated 6-10 years ago and the plan is now terminating, none of these part re-joined the company/service since they still HOLD a balance I believe they should be 100% vested correct? Thanks

Thank you!

Good Morning! Need clarity on handling distribution for a successor plan. There was a stock acquisition and seller plan did not terminate a day prior to the sale date since the termination date and the sale date happened to be the same date this lead to a successor plan situation. The terminating plan has about 26 participants with balance out of which 3 are terminated part and 2 retired the rest are Active participants. There are 2 participants who have active loan as well ( Active part), the acquiring company counsel has advised the 5 participants funds can be distribution however the rest of the 21 part should be transferred to the successor plan ( acquiring company 401k plan). I have couple of questions. Since this is a successor plan situation will this be a Transfer or Rollover ? How will the tax record be handled? Again should we simply be transferring the loan to the successor plan or will it be a rollover to the successor? I believe a final 5500 will be required correct? Thanks

The Plan document is silent of this, could not find anything regarding safe harbor and Military leave

Hi, One of the participant is on a Military leave and when he returns do the plan sponsor needs to pay for the safe harbor portion? The plan is Terminating.

Thank you!

Thank you! Will I be right in saying having a different EIN does not rule out successor plan. The plan sponsor will still need to complete the waiting period in order to establish a new 401k plan correct? although this may not be true if it was a new ownership.

Thank you! I was able to get more information, they are closing business and may be starting a new one 6 months down the line and they do intend to have a 401k plan with a different EIN ( which makes senses now) will the successor plan rule apply her since its a new company, Same ownership with different EIN?

Its not a new company it will be the same ownership and I'm not sure why new EIN. I'm not sure if they can even set up a new EIN.

Hi, Good Morning! Looking for guidance on Successor plan. One of the terminating plan the plan sponsor intends to establish another 401k plan with a different EIN, Will this lead to a successor plan situation? I understand if a 401k plan is set up/exists from the termination date and until ending 12 months after distribution of all the assets can lead to successor plan however I'm not sure if EIN has anything to do with the successor plan rule. Can an employer set up another 401 k plan with a different EIN? Thanks

I assist with the plan termination and we generally have our client contact PBGC directly but I have one client who wants a contact at PBGC.