BenefitsLink logo
EmployeeBenefitsJobs logo

Subscribe to Newsletters

Search the News

Featured Jobs
401k Investment Analyst/Consultant
Retirement Plan Administrator with QKA, QPA, CPC
Technology Professional
Sr. Client Services Manager
ESOP / Employee Benefits Leader
Retirement Account Administrator
External Client Manager for Pension Plan Clients
Employee Benefits Pension Consultant (Law Firm)
Search all jobs
Get the BenefitsLink app for iPhone and iPad LinkedIn

Jump to content


Qualified Replacement Plan

  • Please log in to reply
2 replies to this topic

#1 bvhea


    Registered User

  • Registered
  • 18 posts

Posted 04 August 2009 - 10:21 AM

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?

#2 david rigby

david rigby


  • Sitewide Moderator
  • 3,214 posts

Posted 04 August 2009 - 12:15 PM

Can you use 4980(d)(3)?

I'm a retirement actuary. Nothing about my comments or advice is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial advice.

#3 bvhea


    Registered User

  • Registered
  • 18 posts

Posted 04 August 2009 - 12:23 PM

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.