Retired or Terminated for purposes of Match

[Pammie57]

Client sold business  in 2021.  They have a 401k Plan with a discretionary match (calculated after year end)  The three owners are all over the age of 65 (NRA per the plan doc); their plan does not allocate the discretionary match to terminated participants.  Could we consider them retired instead of terminated at the date of the sale, and allocate them a match for the year?  I know at the time of the sale nobody was focusing on the plan.....  

[ESOP Guy]

Read the plan document very carefully!  It will define Normal Retirement and Normal Retirement Date.   Reading those definitions will answer your question. 

They will most likely tell you when a termination is a retirement under the terms of the plan or not. 

This is not a question of law or rules.  Nor is a retirement decided by the person or the plan sponsor.   Either they are retired under the definition in the plan or they aren't.    The plan document is all that you need to read to know your answer! 

[CuseFan]

I thought any separation after NRA was considered retirement regardless of the circumstances, but agree that you should consult the plan document (that's almost always the first answer to any question).

[Bill Presson]

23 hours ago, Pammie57 said:

I know at the time of the sale nobody was focusing on the plan.....  

This is very common and very frustrating. Because we can almost always make things work if given the chance ahead of time.

With that said, what kind of sale was it (asset/stock)? Was the plan terminated before the sale?

[Bird]

I agree with comments above, but would add that you haven't provided their termination dates.  If it's a small company, odds are pretty good that they didn't sell the company and step out the door, never to return.  It's not hard to make a case that they did something thru the end of the year and term'd Dec 31 or later. 

As noted, it is important to know whether it is an asset sale or stock sale.

If it was an asset sale, then the old company might have existed for some time after the sale (and that is where it is easy to justify employment thru the last day of the year).  If it was a stock sale, well, then the new owners would be footing the contribution bill so you want to be darn sure that everyone knows the implications of the termination dates.

[Pammie57]

term dates in May 2021 - stock sale - new owners are still running company.  

[ESOP Guy]

It sounds like they are retired per the plan document given what you said in your first comment.  But double check the plan's definition of Normal Retirement Age and Date to confirm.  But it sounds like they terminated after both NRA and Normal Retirement Date.