Qualified Replacement Plan
Posted 04 August 2009 - 10:21 AM
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?
Posted 04 August 2009 - 12:15 PM
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.
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.