sobrienTPS

I agree that the decision ultimately lies with the buyer, seller, and attorneys. Obviously though, as the TPA, those parties look to us for input when making that decision. I disagree that a QRP is a reversion. It's a tool that can help avoid or reduce the tax implications of a reversion and, in a QRP, the assets remain tax-sheltered as qualified plan money. For what it's worth, IRS 7.12.1.17.1.2 (11-10-2022) says: "Generally, plan participants aren’t entitled to excess assets unless the plan specifically allows it. Therefore, a plan could provide a direct transfer to a qualified plan or choose to allocate the excess assets to participants (as IRC 415 allows) in the event the reversion language is absent or not in existence long enough to allow a reversion." Also for the sake of this discussion, what if we reallocated the excess up to every participant's 415 Limits and there was still $200,000 leftover in excess assets? Would you say the remaining excess could then be transferred to a QRP?

Apologies, I am the TPA. The seller does have their own attorney.

I have a client who is set to terminate their Defined Benefit Plan in conjunction with the sale of their business. It's a stock sale and the buyer intends to continue maintaining the seller's 401(k) Plan. The DB Plan is significantly overfunded. According to the current Plan document, reversions are not an option when handling the distribution of residual assets. Instead, the Plan says any excess should be allocated among participants. We intend to reasonably increase benefits in a non-discriminatory manner and transfer the rest to the 401(k) Plan, which will serve as a Qualified Replacement Plan. The buyer's attorney insists that because the Plan does not allow for a reversion, use of a Qualified Replacement Plan is not an option. He's pushing for a determination letter. It is my understanding that IRS 7.12.1.17.1.2 (11-10-2022) explicitly says we can use a Qualified Replacement Plan in the event that a reversion is not allowed or has not been in place for 5 calendar years. The attorney is still arguing that because such language is lumped in with reversion language, the reversion provision is required. The attorney is also arguing that we would need to amend the document to say we're using a QRP for residual assets. When making use of a QRP, do you usually amend the document to say residual assets will transfer to a QRP? Also, if you could share any references that clearly specify a QRP can be used independent of a reversion, I would greatly appreciate it.