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Frozen Plan and 401(a)(26)


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Hi All,

I am aware that this topic has been discussed before a few times, however, I'm hoping to get some clarity on a particular aspect that I've posted before but has not been addressed. 

A owner only, husband and wife, frozen DB Plan has been able to cover 40% of all eligible, by just including the owner and his wife (5 total eligible and 40% is 2). After 3 years, they now have to cover an additional 2 employees to cover 40%. There are 2 sons on the census that can be brought into the plan, as the additional 2. The aspect of bringing them into the plan and giving them a benefit of .005 of comp and a 11g amendment, has been discussed before. However, (1) does this mean that the plan is unfrozen, and ALL must be given this .005 benefit accrual or just for the 2 employees that are being added to the plan now? (2) Is this .005 of comp benefit accrual given to them going forward each year or just for the year in which they are added (as plan is still frozen going forward)? Thank you in advance for any insights on this.

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Can an -11g amendment only favor HCEs as this would? 

But anyway, the amendment itself will and should detail which specific employees get to accrue which specific additional benefits, however the fix is going to play out.

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5 hours ago, Bri said:

Can an -11g amendment only favor HCEs as this would? 

But anyway, the amendment itself will and should detail which specific employees get to accrue which specific additional benefits, however the fix is going to play out.

Thank you Bri. As always, your vast knowledge is much appreciated. Thank you for pointing out regarding the issue of the 11g amendment favoring only HCEs (adding only the 2 sons of the owner to the plan). Since the plan is frozen and therefore 410(b) does not apply, would this help to allow for the amendment to add only the two sons, so that 40% ie 401(a)26 is properly covered?

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I may be oversimplifying this but didn't SECURE ease the (a)(26) requirements for a frozen (either hard or soft) plan?  My understanding is that the minimum participation requirements are deemed satisfied if: (1) the plan was amended to either cease all benefit accruals or close the class for benefit accruals, (2) the plan satisfied (a)(26) at the time of the freeze, and (3) there was not a substantial increase in coverage or benefits for the 5-year period preceding the freeze.

If that's the case, then why do you need to provide any accrual for any new participants?

If I have this wrong, please correct me.  Thanks.

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Cathyw thank you again for pointing this out. This is a much needed relief for many plans, and that would work for almost all plans. The third requirement of "there was not a substantial increase in coverage or benefits for the 5-year period preceding the freeze"...seems to be the one hurdle to get over, although it appears that this refers to a 50% change in the average benefits and not a change due to additional benefit accruals for a another year of service.

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