Last Day of Employment Requirement for CBP Accrual

I am working on a Calendar Year CB plan that has an accrual requirement of either 500 hours OR Employment on the last day of the Plan Year.

The plan Froze and terminated mid-year, and only one HCE met the 500 hours requirement.

I know the Termination date creates a short Plan Year for the purposes of funding, but does it also create a short plan year for the accrual period?

Did the participants employed as of the termination/freeze date with less than 500 hours meet the requirements for accrual or do I have to amend the plan and lower the hours requirement? I don't see any guidance for this in the freeze amendment.

Thank you

What does your termination/freeze amendment and or Plan Document say? You may or may not have to give an accrual to anyone employed on the termination date depending on how they are worded.

If you only have an HCE accruing a benefit though you still need to pass all testing for your final year. (401(a)(26), 410(b), 401(a)(4), 416, etc.)

I do not think your amendment creates a new last day for credit entitlement but it did create a 401(a)(26) minimum participation issue even if you are OK on coverage and nondiscrimination by aggregating with DCP (assuming you still have same PYs and can do). You will need to provide some NHCE CB credits, either via an amendment or maybe Plan Administer makes reasonable interpretation that freeze date is the last day requirement for a credit.

On 10/31/2024 at 9:11 AM, CuseFan said:

I do not think your amendment creates a new last day for credit entitlement but it did create a 401(a)(26) minimum participation issue even if you are OK on coverage and nondiscrimination by aggregating with DCP (assuming you still have same PYs and can do). You will need to provide some NHCE CB credits, either via an amendment or maybe Plan Administer makes reasonable interpretation that freeze date is the last day requirement for a credit.

maybe, if you demonstrate the compliancewith (a)(26) using annual method, then, yes, there is an issue.  If you can demonstrate compliance with (a)(26) using accrued to-date method, then it is OK (quite often it works for the year of plan termination).

On 11/3/2024 at 6:10 AM, truphao said:

compliance with (a)(26) using accrued to-date method, then it is OK (quite often it works for the year of plan termination)

true - thanks