Merging and Restating Plans

[Guest merlin]

It's my understanding that if one plan is properly merged into another before the remedial amendment period expires, only the surviving plan has to be restated,provided that the appropriate language is contained in the restatement. Where can I confirm this? What is the appropriate language?

[QDROphile]

The "appropriate language" in the restatement covers the retroactive effective dates of changes to the nonsurviving plan document. The restatement is effectively the GUST amendment of the nonsurviving plan document, so it must comport with that function. You also have to watch other aspects of plan mergers that are not GUST issues, such as vesting schedules.

[Guest slt]

At the very least, I would recommend you identify in the resolutions authorizing the merger (for both the merging and surviving plan) that it is your intent that the merged plan be amended for GUST when the surviving plan is amended and restated for GUST.

Note that there are still effective date issues that you have to worry about. For example, if the merged plan used the increased cash-out limit in operation for distributions after 1/1/99 and the surviving plan used it in operation for distributions after 1/1/98, you have a PROBLEM because now the surviving plan document reads that you should have provided for cash outs at the $5,000 limit from 1/1/98. Your merged plan is now not in compliance with GUST because you are using a different date than that on which you actually operated using the new rule. You should probably attach a specific exhibit with respect to the merged plan listing all of the different effective dates for GUST provisions that did not have a uniform effective date (e.g., $5,000 increase, CRA amendment - that's the 132(f)(4) issue, etc.).

[Guest ama]

With the increased deduction limits for profit sharing plans that will be in effect on 1/1/02, it makes sense in many situations for employers who maintain both a money purchase plan and a 401(k) profit sharing plan to merge the money purchase plan into the 401(k). However, these same employers often will wish to fully fund the money purchase plan for 2001. Can this be done if the merger is effective 12/31/01? If the merger does not take place until this date, must the money purchase plan first be amended for GUST or can only the surviving plan be amended, effective the same date?

Any thoughts are appreciated.

[rcline46]

First, I would STRONGLY recommend restating the disappearing plan before the merger. It is just too messy to put two plans into one document. Even do it for free because it will make your restatment of the surviving plan much easier.

As to a 12/31/01 merger date and the MPPP contribution, if you feel more comfortable doing it, put into the resolution the contribution will be made.

Make you life easier, not more complicated!

[KJohnson]

Is there any rush to merge if you have a money purchase pension plan with a 1000 hour of service and/or last day of the year requirement. It seems that as long as you merge before the accrual of the 2002 contribution and give yourself plenty of time for the 204(h) notice we should be o.k. Anyone have different thoghts?

[Guest merlin]

ama-I've been told that at the IRS Q&A session at the recent ASPA conference Jim Holland/Dick Wickersham/Paul Shultz said that it would be permissible to merge the MP into the PS/401(k) @ 12/31/01and still preserve the 25% deduction limit for 2001.When pressed about written guidance they said not to expect any. But it's been caught on tape.

rcline46-How does restating the MP plan first make the ultimate restatement of the surviving plan any easier? Assuming proper notice, preservation of BRFs,etc. as noted above it would seem to be much more advatageous to merge and restate once rather than restate twice,and then merge,especially if you're not going to get paid for the second restatement.Please elaborate.

KJohnson-I agree. In fact it might be a good way to even out your work flow.

Now my question:If the MP plan is merged @ 12/31/2001 (or 12/31/2002 for that matter) can the MP contribution still be accrued? Or does the fact that the MP plan has disappeared require the contribution to be deposited @ the date of the merger?