Participating ER - stop participating?

Both I and another co-worker have plans that are a control group where 1 spouse's company sponsors the plan and the other spouse's company is an adopting er.  With SECURE 2.0, the control group link (minor children) will go away and thus the plan will become a multiple employer plan.  It may, however, be better for the spouse that is an adopting/participating employer to stop participating in the current plan and start up their own retirement plan for 2024 and beyond.  

Would this just require an amendment to "unparticipate" in the plan they are currently in?

There will be a little more to it than that since a new spinoff plan will need its own trust and money has to be moved around.

Out of curiosity, what does the spouse see is the perceived advantage of having a second plan?

15 hours ago, doombuggy said:

Both I and another co-worker have plans that are a control group where 1 spouse's company sponsors the plan and the other spouse's company is an adopting er.  With SECURE 2.0, the control group link (minor children) will go away and thus the plan will become a multiple employer plan.  It may, however, be better for the spouse that is an adopting/participating employer to stop participating in the current plan and start up their own retirement plan for 2024 and beyond.  

Would this just require an amendment to "unparticipate" in the plan they are currently in?

The question is what documentation was required when the spouse's company started participating in the plan?  Our prototype indicates that no other company (controlled group or other) participates unless a participation agreement (amendment) is entered into signed by both the sponsoring employer and the participating employer.  Too that extent, to "unparticipate" an amendment (removing the participation agreement) is required.  Absent that, simple stop participating is an operational error that may require corrections (missed deferral opportunity)

15 minutes ago, MoJo said:

The question is what documentation was required when the spouse's company started participating in the plan?  Our prototype indicates that no other company (controlled group or other) participates unless a participation agreement (amendment) is entered into signed by both the sponsoring employer and the participating employer.  Too that extent, to "unparticipate" an amendment (removing the participation agreement) is required.  Absent that, simple stop participating is an operational error that may require corrections (missed deferral opportunity)

In my case, husband who is 100% owner of his company and the only employee, set up the plan in 2018.  in 2019, wife, who is 100% owner of her company and the only employee, became a participating ER of husband's plan.  The plan document does have the proper documentation that her company is a participating ER, as you indicated in your comment.  So it sounds like the plan would need to be amended to remove her company for participating; she can then set up her own plan to receive these assets and buy real estate to her hearts content...

Would this be a distributable event?  Almost like a plan termination?  I know nothing about how to set up a spin off at this point, if that is what is needed.  In my case, it might be cheaper for this couple to keep the plan as it is when it becomes a multiple ER plan in 2024 and she can buy out side assets held by the plan.  In my co-worker's case, the wife's company is the sponsor and her husband who owns his company 100% is the only employee; her company has employees, so it would be better for him to spin off to his own plan, and we just don't know what that entails...

We don't believe that terminating participation is a distributable event.  That would require either a separation of service from the employer (not necessarily the plan sponsor) or a plan termination (unlikely, as the plan sponsor wants to continue the plan.)  The solution is a spin-off to the now non-participating employer's plan.

Plan termination would not work either because of the successor plan rules.

Remember, distributions are different than plan to plan/trustee to trustee transfers. 

The devil is in the details but you'll need at a minimum-

Amendment spinning off wife co ees from the current husband/wife plan and end wife's participation in husband/wife plan which will now solely be husband plan.

The spinoff amendment need to preserve certain source characteristics, balances and protected benefits in the new plan.

You need a new plan for wife with a separate trust.

You need to transfer the wife's assets in the current husband/wife plan to the new wife plan.

Then wife can do what she wants with the assets in her plan, assuming the trust documents allow for it.

This Benefitslink post was very helpful to me the first time I helped a client with plan to plan transfer