Common use of Eligible Employer Clause in Contracts

Eligible Employer. For purposes of the SIMPLE 401(k) Plan provisions, an Eligible Employer means with respect to any Plan Year, an Employer who had no more than one hundred (100) Employees who received at least $5,000 of Compensation from the Employer for the preceding year. In applying the preceding sentence, all Employees of controlled groups of corporations under Code Section 414(b), all Employees of trades or businesses (whether incorporated or not) under common control under Code Section 414(c), all Employees of affiliated service groups under Code Section 414(m), and Leased Employees required to be treated as the Employer’s Employees under Code Section 414(n), are taken into account. An Eligible Employer who elects to have the SIMPLE 401(k) Plan provisions apply to the Plan and fails to continue to qualify as an Eligible Employer for any subsequent year, is treated as an Eligible Employer for the two (2) years following the last year during which the employer was an Eligible Employer. If the failure is due to any acquisition, disposition, or similar transaction involving an Eligible Employer, the preceding sentence shall apply only if the provisions of Code Section 410(b)(6)(C)(i) are satisfied. An Employer that establishes and maintains a SIMPLE 401(k) plan for one or more years, and fails to be an “Eligible Employer” for any later year, is treated as an Eligible Employer for the two years following the last year the Employer was an Eligible Employer. An Employer that previously maintained a SIMPLE plan is treated as satisfying the “100- employee limitation” for the two calendar years immediately following the calendar year for which it last satisfied the 100-employee limitation. However, this grace period rule does not apply if the reason for the failure to be an Eligible Employer was due to any acquisition, disposition, or similar transaction involving an Eligible Employer, unless certain conditions are met. These conditions are: (1) the Employer becomes or ceases to be a member of a group of employers aggregated under Code Sections 414(b), (c), (m), or (o); (2) the plan satisfies Code Section 410(b) coverage requirements immediately before the change; and (3) coverage under the plan is not significantly changed during the transition period that begins on the date of the transaction and ends on the last day of the first Plan Year beginning after the date of the transaction.