Successor Plan Rule

[K2]

I have a 401k Profit Sharing plan with more generous eligibility than the statutory requirement.  The plan is top-heavy.

I would like to start a new 401k plan with immediate eligibility and exclude Keys.  I would transfer the Deferral Component of the existing plan to that plan.  The new plan will not be top heavy.

With the existing plan, I want to amend out salary deferrals and have it be a stand alone profit sharing plan with two year eligibility.  Keys will be eligible to participate in this plan.  I'll have a cash balance plan paired with this that has keys in it as well.

Any issues?  Successor plan rules?

 

 

[Luke Bailey]

K2, really need more information. For starters, are these calendar year plans, and will the new plan be effective only 1/1/2020? Assuming yes and yes, will the old plan pass 410(b) on its own after 2019? Note that because the determination date (dd) for 2020 will be 12/31/2019, the old/continuing and new plans will be a required aggregation group for 2020, even if the old/continuing plan doesn't need new plan for 410(b). See IRC sec. 416(g). After 2020, on the face of the statute you would think that there would be required aggregation only if the old/continuing plan needs the new for 410(b), but Treas. reg. 1.416-1, Q&A T-6 says RAG goes back 5 years. It is based on a prior (either pre-2006 or -2001, I'd have to look up) version of statute, but IRS never changed reg and for some reason thinks it does not need to.