business scale down ..401(a)(4)&401(a)(26)

[Draper55]

Suppose a small business owner with a db scales back and works final two or three years without ees. Does this cause any 401(a)(4) or 401(a)(26) issues? Not worried about the partial termination issues. I don't think this is BRF issue for 401(a)(4)(note no early retirement subsidies). For 401(a)(26), I am thinking you can't cover employees you don't have so this should be ok as well.  Wondering if there is anything I am not considering?

[Lou S.]

If there are excess assets or other amendments that increase the owner's benefit you could have a discriminatory increase in the owners benefit with respect to timing if they all go to the owner.

Annually for 401(a)(4) and 401(a)(26) you are fine with the owner as the only employee.

 

[Effen]

check out 1.401(a)(4)-5.  Plan amendments and plan terminations before proceeding.  

[CuseFan]

Also, 401(a)(26) has some prior benefit structure requirements, but if you don't increase benefits (including excess assets) when it's only the owner left then you should be OK.