401(a)(26) Minimum Participation

Question 1

Mandatory Disaggregation under 401(a)(26)

Answer 1

1. ESOPs
2. Multiemployer plans
3. DB Plan with other arrangements
4. QSLOBs

Question 2

Permissive Disaggregation under 401(a)(26)

Answer 2

1. Each CBA Unit

2. Otherwise excludable employees

Question 3

Definition of 401(a)(26)?

Answer 3

Plan must benefit:

1. at least 50 employees or
2. greater of
   a. 40% of employees
   b. 2 employees (1 employee if only 1 employee at company)

Question 4

For 401(a)(26), how is it decided if a participant benefits on a specific day. What day or days are used to determine if 401(a)(26) is passed?

Answer 4

A participant benefits on a specific day if the participant benefits under the plan in that year and they are a ptp on that day.
Plan can be tested on any day (can vary year to year) that reasonably represents employer’s workforce and the plan’s coverage.

Question 5

How does 401(a)(26) apply to prior benefit structure?

Answer 5

Plan’s prior benefit structure must provide a meaningful benefit (facts and circumstances) to the lesser of 40% of employees or 50 employees

Question 6

How does 401(a)(26) apply to former employees?

Answer 6

If the plan provides a benefit to former employees (i.e. ad hoc cola), then must test these former employees
1. Must benefit the lesser of 50 former employees and 40%

Question 7

What plans get an “auto-pass” under 401(a)(26)?

Answer 7

0. DC Plans
1. No HCEs
2. CBA portion of a multiemployer plan auto passes 401(a)(26), but employer can choose to aggregate both parts and test together for 401(a)(26).
3. Plan is underfunded and no ptps are benefitting AND
   a. Plan covered by PBGC OR
   b. Plan not covered and is not Top Heavy

Question 8

Determining employees benefiting under 401(a)(26)

Answer 8

Same as 410, except 412(i) rule about insurance premiums

Question 9

What are the minimum participation requirements. I.e. plan can exclude participants with less than:

Answer 9

1. 21 years old and 1 year of service

2. 21 years old and 2 years of service if 100% vested at 2 years

Question 10

After meeting the minimum ptp requirement, when must the ptp enter the plan?

Answer 10

Earlier of :

1. 1st of the plan year
2. 6 months after meeting minimum ptp requiremnt

Question 11

T/F Plan Sponsor may permissively aggregate plans to meet 401(a)(26).

Answer 11

FALSE

Question 12

For 401(a)(26), how are the following situations treated differently:

1. Multiple employers in a controlled group
2. QSLOBs

Answer 12

1. All employers in the controlled group are aggregated for the count determination
2. QSLOBs may be broken up and treated separately for purposes of determining the count of total employees

Question 13

If an employer has 200 employees, how many must be benefiting under a plan to pass 401(a)(26)?

Answer 13

50