Employee goes from hourly to salaried with same employer leaving balan

This may be common knowledge, but I've never had this cituation before. Employee was hourly paid and participating in Union Hourly 401(k) plan. He subsequently becomes exempt salaried employee with the same employer and is now only eligible to participate in the Salaried 401(k)Plan. Can he be given the option to roll over his Union 401 account to the Salaried 401 (k)Plan, or is this not permitted by regs.?

If not, can we still allow him to borrow from the Union Plan?

I believe it is clear that the change does not constitute a separation from service, so I do not believe the transer could be a rollover.

I had looked at this issue one other time and came to the following conclusions: 1)there can be trustee-to-trustee transfers between the plans, 2) it would be highly preferable for both plan documents to specifically allow trustee-to-trustee transfers, but it is probably not essential, 3)various rights such as methods of distribution would have to be preserved for the transferred money, 4)if the transfer is not in cash, the plan documents would need to provide for in-kind transfers and the receiving plan would have to allow for the type of asset transferred.

I'd still be interested in other opinions on this.

[This message has been edited by John A (edited 03-07-2000).]

John A:

Thanks. I suspected that this topic may have been discussed before.

I have numerous clients that routinely use the trust-to-trust transfer approach. In most situations, the hourly and salaried plans have the same trustee and same investment options, so it's possible to do an in-kind transfer of fund shares, and avoid being out of the market.

------------------

Jon C. Chambers

Principal

Schultz Collins Lawson Chambers, Inc.

(415) 291-3004

A trust-to-trust transfer is certainly an option but don't forget that you need to comply with section 411(d)(6) and you must protect optional forms of benefit. This is frequently a problem . . .

John A, the link in your message doesn't work any more. Anything you can do to point me toward it? We have had this issue come up recently.