SH Match Termination

[12AX7]

Employer wishes to terminate their SH Match Plan. Would the 30 day notice requirement still apply? I can't see where the proposed regs or other guidance would eliminate the notice requirement. I can understand where the 30 day notice requirement would give participants time to change their deferral election if the plan were to continue as a non-SH, but this action would not apply in a plan termination. If there's relief, I can't see it.

[Kevin C]

The 30 day notice requirement applies to the termination of a safe harbor plan unless there is either a 410(b)(6)© transaction or the employer incurs a substantial business hardship.

1.401(k)-3(e)(4) Final plan year. --A plan that terminates during a plan year will not fail to satisfy the requirements of paragraph (e)(1) of this section merely because the final plan year is less than 12 months, provided that the plan satisfies the requirement of this section through the date of termination and either --

(i) The plan would satisfy the requirements of paragraph (g) of this section, treating the termination of the plan as a reduction or suspension of safe harbor matching contributions, other than the requirement that employees have a reasonable opportunity to change their cash or deferred elections and, if applicable, employee contribution elections; or

(ii) The plan termination is in connection with a transaction described in section 410(b)(6)© or the employer incurs a substantial business hardship comparable to a substantial business hardship described in section 412(d).

[12AX7]

Kevin, that's what I saw as well. As far as I know the exceptions do not apply to this client.

[Kevin C]

The other kicker is that if the exceptions don't apply, you have to do ADP/ACP testing. That is part of satisfying paragraph (g).

[12AX7]

And Top Heavy minimums, if applicable.