bvhea

Qualified Replacement Plan

3 posts in this topic

IRC 4980(d)(2)(A) defines a qualified replacement plan as one in which at least 95% of the active participants in the terminated plan who remain as employees of the employer after the plan termination are active participants in the replacement plan.

I have a client whose terminating defined benefit plan only covers employees in a division that was shut down over 10 years ago. There are no active participants in the terminating plan. However, the employer does sponsor a 401(k) plan that covers current employees. Can they transfer the surplus assets in the terminating plan to the 401(k) plan and avoid the 50% excise tax?

Share this post


Link to post
Share on other sites
Can you use 4980(d)(3)?

That could be a possibility. However, the client would rather use it for current employees than a group of employees that was terminated over 10 years ago. Also, the terminated participants were union employees and the current employees are not. It seems to me that they satisfy the requirements of 4980(d)(2) since the new plan covers all of the current employees that were in the terminating plan. There just aren't any current employees that were in the terminating plan. But 95% of 0 = 0 so they satisfy the requirement.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!


Register a new account

Sign in

Already have an account? Sign in here.


Sign In Now