"May be looking into taking over plan a db plan which has a good amount of prefunding balance. The sponsor wants to use portion of it for MRC for 2025. I do not see an election signed by 12/31/2025 -- are they late or do they have till 9/15/2026 to make the election? Does FTAP need to be over 80% or 100%? Does prior year funding% need to be over 80% or 100%?"

"Suppose you have a professional employer who has sponsored a Defined Benefit Plan and a Profit Sharing Plan, both with a December 31 plan year. There are eight participants in each plan. The arrangement has worked well for over 10 years. The defined benefit plan is becoming over funded so they should terminate that plan as soon as possible. If the Defined Benefit Plan is terminated effective 7/15/2026 all participants would have accrued a benefit in 2026 because they all would have worked more than 1,000 hours by that time. Not a problem. However, I believe the Defined Benefit Plan would then be deemed to have a short year for 2026 (1/1/2026-7/15/2026). Can the 7/15/2026 Defined Benefit Plan be cross-tested with the 12/31/2026 Profit Sharing Plan? We can wait to terminate the Defined Benefit Plan until year end but then we may be waiting around just watching that plan becoming more and more over-funded. Unless there is some prohibition in doing so, it should be easy enough to test the 7/15/2026 DB with the 12/31/2026 PSP. After all, participants have already accrued 2026 benefits in the DB plan and most will receive at least 7.5% of salary contributions in the PSP."

"We have a plan with about 1000 active employees. About 300 were moved to a leasing corporation in 2025. The plan excludes leased employees. Would this be considered a partial plan termination?"

"A contributing employer enrolls a new employee into a multiemployer money purchase and health & welfare funds. Assume further that we are referring to two individuals: one of whom is an undocumented alien and one who is an American citizen. After contributions have been made by the employer and allocated to or for the benefit of the employee, it is discovered that the individual supplied a false Social Security number. From the perspective of the two funds, what should be done in this instance regarding the following: (a) the amounts that have already been contributed; and (b) the payment to the fund of future contributions? ... 

'With respect to the amounts already contributed to the qualified plan, unless the plan document has been amended to take advantage of the recovery of overpayments, in accordance with Section 414(aa) of the Code, nothing can be done to the amount already allocated to the employee's account ... If the employee terminates employment, the account could be forfeited ... For the health and welfare fund, there are no individual account balances and no accrued benefits under a welfare plan and contributions to the fund would be pooled, similar to a defined benefit plan. Unless the plan or trust includes a provision protecting amounts contributed by the employer on behalf of its employees, an argument can be made that the amount could be applied to satisfy administrative expenses under the fund or as a credit to future contributing employer contributions....

"With respect to future contributions, for both the money purchase fund and the health and welfare fund, the contributing employer should be notified that no future contributions on behalf of the individual will be accepted by the funds. My reasoning is that the funds were not aware of the validity of the Social Security number issue when the previous contributions were made. However, once the funds became aware of these facts, continuing to accept such contributions could make the funds complicit in the fraud.

"Considering the implications of ejecting the 'employee' from the plans and their impact upon the plan's qualification and eligibility for income tax exclusions, does anyone have any suggestions or other thoughts concerning the adoption of an amendment containing pro-active language which would [1] enable the funds to revoke contributions allocated (or benefits accrued in the case of a defined benefit plan) prior to the fund's discovery that the employee supplied a false Social Security number, [2] if [1] is not permissible, prevent the allocation of future contributions to the employee's account, [3] to the extent amounts previously contributed to the fund on behalf of the employee cannot be revoked, to prevent vesting of such contributions; or [4] to provide a blanket exclusion of such employees from participation in the plan without causing havoc or negative results for coverage testing? In a sense, this is something that plans should be able to do since Social Security numbers are integral to proper tax withholding and reporting from both a payroll and plan administration perspective?"