DTH

Entity Change

3 posts in this topic

A 501©(3) org changed to a governmental employer. The 501©(3) org had a 401(k) plan that they froze when becoming a governmental employer. They then started a 457(b) plan and 401(a) profit sharing plan that matches deferrals in the 457(b) plan.

They would like to get rid of the 401(k) plan. Is the 401(k) plan considered a predesessor employer plan so they can't terminate and disburse the deferrals until an event? Can they merge the 401(k) plan into the governmental 401(a) plan?

I can't find anything definitive. I think they may be stuck with the frozen 401(k) plan.

Thanks!!

Edited by DTH

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I found that Treasury regulation section 1.401(k)-1(d)(4) provides that a contract that satisfies the requirements of section 403(b), or a plan that is described in section 457(b) is not considered an alternative defined contribution plan. Thus, the employer can terminate the 401(k) plan and distribute the assets.

The question remains whether they can merge it into the governmental 401(a) plan.

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Why wouldn't the 401(a) plan be considered an alternative defined contribution plan? Under the reg you cite, I don't think they can distribute to current employees, which basically forces them to merge the 401(k) into the new 401(a). Seems like they would have reached the same result with less trouble by freezing the 401(k) portion of the old 401(k) plan and using it as their 401(a) plan.

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