Nate S

I hate to sound catty, but this is completely off-topic. 100% you are putting the cart before the horse, talking about end-game procedures. My concern is about the intervals we are faced with now, and the prudence or duty to disclose information related to the administration procedures that the document is requiring now, but that must be balanced against the idea that doing so harms the participant who follows through. So far we have: 1. Don't diversify at all. 2. Pass a price protection floor policy to guarantee the buyout payment if higher than the pye fmv. 3. Wait and see who knows what and how much can actually be said in a month or so. 4. Blindly follow the document as written, as that is the only obligation really beholding to the sponsor at this time.

@Peter Gulia Thank you for the hypotheticals, those will be handy to help navigate these discussions with the Sponsor and their advisors!!

@QDROphile @ESOP Guy The question of legal counsel is getting tricky as this marks the second case where the reported "ERISA" attorney who helped structure the transaction, setup the plan, and continues to maintain the document, has bowed out of any questions about the sale and subsequent Plan Termination as discussing the Termination presents a conflict of interest. We will likely turn to the independent trustee for their guidance as well. Initial thoughts are to process only the ongoing installment distributions, dependent on the status of the sale transaction after the next 45 days. As it proceeds though, discussions by the Board of Directors and due diligence/disclosure efforts will cause the 2 aforementioned diversification eligible participants to be aware of the offer. The trustee will determine if another valuation or fairness opinion is required once the binding offer is produced. @EBECatty Good idea on true-up payments! What would you all think about a diversification notice that delays the election until the transaction is finalized under the premise that the value can't be determined until then?

A 100% ESOP-owned company has received a letter of intent to be acquired by a private equity company. The transaction is expected to be a stock sale about 40% above the 12/31/2023 FMV. Should the expected sale price be disclosed on the diversification notice? At least 2 of the diversification eligible participants have or will have knowledge of the sale discussion at the time the notices are scheduled to be distributed, but the rest of the eligible group may not know all the details. Please assume the diversification is timely based upon the availability of the final FMV, I'm only concerned about the fiduciary responsibility of providing the information necessary to make an appropriate election.

Put the match, adjusted for +/- earnings, into forfeiture and offset future match contributions until used up. Remove the unintended deferral, also adjusted for +/-, and refund to the employer as mistake of fact. The mistake was calculating the deferral as a positive amount. The fact is that it should have been zero. Not even a question, clear mistake of fact, not an ounce of discretionary consideration regarding the deferrals.

Recordkeeper should be notified of the impermissable allocations and asked to revise 1099-R to not include basis allocated, and to reclassify any distribution of gains. Beneficiary should be issued 1099-MISC for each year from Sponsor for basis amount if they do not intend to request return of overpayment. If any forfeitures were used to make safe harbor allocation, those amounts should be deposited back to the forfeiture account by the Sponsor.

I would normally take the more conservative approach of making the excess asset allocation be non-discriminatory, when tested as a stand-alone component. Consider the two following alternatives: 1) As a transfer to a DC Plan, the allocation would be to ALL participants benefitting under the DC formula, pro-rata, integrated, or class-based(and subject to minimum gateway!) 2) As a pre-termination increased benefit under the existing CB plan, would the DC offset still completely eliminate the new higher benefit amount? If you could argue that it did and therefore the increased benefit goes only to the HCE's, don't you then run into the same limit issues that created the excess in the first place?

The freeze amendment and 204(h) notice should indicate what is being frozen after June 30. I would normally expect it to say that service and compensation are not considered after the freeze date. However, since 401(a)(26) is so poorly defined it's not that big of a stretch to argue that compensation should be measured for only the period during which the benefit was actually accrued.

A receiving Plan might fail to follow their document and create an operation failure by not accepting a "rollover" contribution. Sure, qualified ROTH assets create a receiver issue, but the initial obligation has always been on the paying Plan to ensure that the receiving Plan is itself qualified! That form used to be part of our distribution package, a certification by the receiving Plan Administrator that their Plan is itself qualified. @justanotheradmin try flipping the script on them and ask that they provide a reciprocal "qualification letter", then you know what form and content must be acceptable to them!!

@Bill Presson @Peter Gulia Previous discussion including cites and known guidance can be found here:

The IRS does not want to process a 5330 for <$100, also since your timeframe from withholding to correction is less than 6 months you should deposit the excise tax monies as part of the lost earnings. At most, keep a copy of the 5330s for illustrative purposes.

You don't need to amend eligibility entirely, you can target the amendment to waive eligibility for employees hired as of XX/XX/2022.

Yeah, that's where I tell them to go take a long walk, they're not the regulatory authority on taxation. As long as ALL the participants were shown to have been paid their proper benefit it is 0% the business of the PBGC, especially in a standard termination.

From a TPA's perspective, trust accounting should be fairly broad, track the deposits & distributions, any change in value is based solely upon the remaining difference from the BOY to EOY values. A participant statement doesn't care if the change was dividends, bond interest, short-term capital gain, etc.; only the Schedule H does. Have a conversation with the auditor about how much they care about the gain/loss accounting; then have a corporate trustee quote their services to meet the auditor's expectations. Then remind the client that they have a fiduciary duty around plan expenses, and have the advisor quote his favorite recordkeeping platform. Pooled plans make little sense in today's service environment, typically only non-liquid or non-marketable assets require such treatment. And even when those are present, you may be able to get them built into a recordkeeper's model investment product!

Agreed, the maintenance of the Plan for that length of time would endanger the tax-qualification of the termination, especially as there are no participant benefits left to be paid. Also, isn't the reversion deemed to have occurred once the participant benefits are fully satisfied? I read that AO as allowing for the treatment of settlor expenses, in conjunction with the plan termination, as fiduciary expenses. If the thought here is that the PBGC always audits plan terminations, the the service provider should be able to anticipate that cost and the charge of a retainer upon termination would be a reasonable fiduciary expense. The trust should be taken to $0 in an administratively expedient timeframe immediately following the final benefit payment.