"Does anyone have any good resources, articles, webinars, links etc on how testing is impacted when rank and file workers are handled through a PEO as their employer, but the owners are not? I've done some searches here on BenefitsLink but haven't some across anything particularly useful, but please feel free to share links to other related threads too. The PEO workers are covered by the plan offered by the PEO, the owners are not, and want the business to sponsor its own plan. I am fully aware PEO co-employment is NOT the same as Leased EE status, which is why I'm asking. I've had some sponsors argue that the NHCE are not their employees at all, which doesn't seem right to me, but I am not well versed in PEOs, and I'm sure there are varying flavors, so who knows. Think basic 401(k) plan with a safe harbor provision."

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"Hypothetical situation: Cash Balance Plan terminated and paid out 2 years ago, final 5500 was filed. Plan was never filed with the PBGC due to qualifying exemption as a professional service firm. You are requisitioned to assist with facilitating report and documentation exchange to a potential buyer in an acquisition of the (former) Plan Sponsor as your former colleague who handled this plan is no longer employed. You notice that the plan exceeded 25 active participants and probably should have been covered for the last 3 years. In their very thorough due-diligence, appears the potential buyer has also noticed. What is the potential exposure here? How would one go about even starting a corrective action. At minimum, I'm thinking comprehensive premium filings and payments for the years coverage is obligatory. I also see ERISA 4071 states the max per-day penalty, which looks very significant, but also that they would not likely charge that in a case like this. Would one go so far as to say this is a qualification failure with a need to seek IRS remediation? Any other considerations?"

"Assume an unfunded welfare plan has gone above and below the 100-participant threshold over time and is currently under the threshold -- so that it previously filed a 5500 but has not in a couple years. The Plan will terminate and pay all benefits this year (and had below 100 participants on 1/1/25). Does it need to file a final 5500 even though it's under the 100-participant threshold?"

"What happens to nondeductible contributions at plan termination? We have a plan sponsor that has negative K-1 income and 2024 is their final plan year (12/31/2024 plan termination date). They have a minimum required contribution and want to know what happens to this money at time of distribution. For what it's worth, it's an owner only plan and presumably, the owners (50/50) will be rolling over their funds into an IRA. I don't have any experience with nondeductible contributions at plan termination so am feeling a bit lost as the TPA."

"We have a plan that is to merge into a large corporation plan (not our client.) I see our perhaps only responsibility is to file the final 5500 showing the assets transferred to the acquiring plan. Other than that, I am going to ask that the acquiring company to produce any corporate resolutions, notices, merger documents, etc. I believe that would happen without my prompting. I don't think the plan being merged would need to be updated for SECURE acts since it is technically not terminating. I'm going to indicate that the acquiring company handle all required communications to facilitate the merger. We don't deal with these types of issues since our clients are primarily small businesses and professional. Your comments are appreciated."

"Employer A has a 401k plan. The plan's eligibility provisions exclude employees of Related Employers. Employer B purchases Employer A resulting in A and B in a controlled group. A's 401k plan is not immediately terminated (plan still has assets that have not been distributed). When performing coverage testing for A's 401k plan for the plan year after the transaction, the plan would like to exclude Employer B's employees from testing. Under the IRS general rule (all employees of all employers in a controlled group must be included in testing), B's employees should be included in the testing. A did not elect to include the 410(b)(6) transition period in 401k plan. A would like to use permissive disaggregation to put separate out employees (specifically B's employee) that are not 21 and do not have 1 year of service (the 401k plan's eligibility provisions are more lenient -- age 18 and 3 months of service). Can A use permissive disaggregation as to B's employees if B's employees are not eligible to participate in the 401k plan in the first place? Doesn't permissive disaggregation assume that the pool of employees are eligible employees?"

"Corporation A purchases Corporation B during 2025. Corporation A sponsors a 401(k) plan that has true-ups. Corporation B's plan will be terminated, but effective December 1, the employees of corporation B will transfer to Corporation A. Corporation A credits service with Corporation B, so those employees will be eligible to defer in the Corporation A plan immediately.

"So, it seems that at least theoretically, there could be a true-up for these employees (fewer than 20) for the 1-month of salary deferrals in the Corporation A plan. Although the Corporation A plan calculates the match on an annual basis, they couldn't use compensation paid from another company while they were not a controlled group. Any disagreement with that? (As an aside -- if they became a controlled group in, say, June, could/should the deferrals from that date be used in the calculation of a true-up in the Corporation A plan, even though those 2o employees were still employees of Corporation B?)

"Then we come to the ridiculousness. The Corporation A HR person is adamant that they don't want to make any true-ups for the former Corporation B employees. If we assume that the deferrals for these former Corporation B employees only start in December and are based only on salary/match in December, the potential true-up is negligible at best. Is there any way to avoid a true-up in this situation, if the calculations require it? It seems like an amendment prior to 1/1/26 could result in a cutback."