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Merging 401(k) Plan (w/ merged MPP) into other 401(k) Plan


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Company G is buying all of the stock of Company X-1, a wholly owned subsidiary of Company X. Both G and X-1 maintain 401(k) plans for the benefit of their employees. X-1's 401(k) had previoiusly had assets from a money purchase plan merge into it, so the plan document has language regarding spousal consent and annuities. Although G's 401(k) plan has language on annuities, it meets the profit sharing plan exception unless an employee elects an annuity form of distribution. It is intended that X-1's 401(k) plan merge into G's 401(k) plan. However, to avoid the complexity associated with obtaining spousal consent for such transactions as hardships and loans, G prefers not to accept a transfer of the money purchase portion. Assuming that the money purchase portion was fully vested prior to the merger into the X-1 401(k) plan, could X-1 simply purchase annuity contracts for that portion and issue them to those X-1 employees whose accounts included the merged money purchase plan?

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