Mid-year termination of 401(k) Plan

[Guest PAM]

Is there any reason why a 401(k) Plan cannot terminate mid-year as long as the proper notices are given to participants, etc. If it's ok, can anyone fill me on any "catches" or problems to look out for with deferrals already in progress. Thanks

[Guest Marjorie Rogers]

As long as the Plan Document permits the Employer to terminate the Plan, it can be terminated mid -year. However, before terminating the 401(k) Plan it would be wise to perform ADP, ACP, and 415 tests. The reason for this is that if your HCEs fron loaded their contributions you may incur a problem in passing the ADP and ACP tests.

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Marjorie A. Rogers

Sutin, Thayer & Browne

Albuquerque, New Mexico

mar@sutinfirm.com