"Hi. We had both a 403b and 401k plans. We decided to freeze our 401k plan (no contributions) a few years ago and use the 403b as our sole DC plan. The question is what does this plan freeze do to our vesting (3 year cliff)? I had thought we could just continue with applying our vesting schedule. But I read that the IRS may view a 401k freeze as a 'complete discontinuation of contributions' and require full vesting of all participants.

"I couldn't find anything official, but did find this on an IRS website. We haven't made many contributions to our profit-sharing plan. How will this impact our plan termination? Although employers are not required to contribute every year to a profit-sharing plan, contributions must be recurring and substantial. If the amount is not significant enough to show an intention to continue the plan, the IRS will treat the contributions as discontinued. A plan is treated as terminated for vesting purposes if the employer completely discontinues contributions. The employees affected by the discontinuance must become 100% vested. Generally, you must vest all affected employees no later than the end of the taxable year following the taxable year in which you made your last substantial contribution (IRC Section 411(d)(3)). The IRS presumes that an employer has completely discontinued contributions when the employer fails to make substantial contributions for at least 3 years in a 5-year period. If this happens, the burden shifts to the employer to show that a complete discontinuance has not occurred (Announcement 94-101).

"I also found this on the IRS website. Does anyone have experience with this? Any thoughts?"

"Client had been a single employer for 5500 filing and filed under 001. Then employer became a related employer due to an acquisition and joined parent's plan as adopting employer. Initial 001 Form 5500 had a final filing when the assets merged into the parent's plan. A few years later and due to ownership change, they are no longer related so the current plan is a MEP and the Client is spinning out their portion of the MEP into a stand alone plan (June 1, 2023).

"My experience has been that the effective date of the newly established spin-off plan should be June 1, 2023. The Client would use 002 since 001 had been previously used. Since this is a spin-off, there are protected benefits and no distributable events (that is not the issue).

"The service provider is insisting that the effective date be 1/1/2018 (effective date of the prior parent's plan). My concern is that once filed, the EBSA is going to ask about all of the missing prior 5500 filings, which could be avoided with a new effective date and I also believe that the 5500 must be marked as 'First Year Filing'.

"Any experience out there with using a prior effective date and what notices get generated?"

"A few years ago, my spouse and I started self employed activities. After checking with our CPA we opened two solo 401k plans (one for me and another for my spouse). We did not contribute our self-employed income to our solo 401(k). At that time, we were changing our w2 jobs and we had to move out of our 401k funds. We could put 410k funds in trad IRAs but it would block us from backdoor roth conversions. So we used our solo 401k accounts and put our funds there (my spouse's 401k funds went to her solo 401k and my 410k funds went to my solo 401k).

'We continue self-employment activities and recently opened an LLC (taxed as qualified joint venture) for new project. I talked with TPA and they said that all self employed activities and LLC income should go under one solo 401k plan. So now we are starting to think about a way to fix this situation and consolidate our solo 401k plans.

'TPA suggested the following course of action: [1] You will select 'restatement on the application,' You will use your current plan name. However, you can input your new LLC and EIN. On the application you will choose your desired trust name and we will obtain and EIN for that trust name. [2] We will be giving you a new adoption agreement. [3] Do trustee-trustee transfers from Fidelity solo 401 accounts [4] Close Fidelity solo 401 accounts '

I have a concern regarding this new solo 401(k) plan that you described above. It says this plan would be linked to the LLC and its EIN. Does it mean that the solo 401k plan will not be protected by 'limited liability' and that anyone who may sue LLC may claim the new solo 401k plan funds as well (assuming there is no 'piercing the veil')? What would happen in the event that an LLC is disallowed (closed)? Is it possible to create a 'general purpose' LLC plan that would allow my spouse and me to contribute earned income from the LLC as well as from self-employed activities and not depend on the LLC?"

"I have a plan that apparently has decided to terminate. It is an owner only plan and he has no comp. The plan's assets are around 50k. Plan was created in 2018 and has never had to file a 5500-EZ. Do I need to file one for the final plan year, even though the assets are still under $250k?"