Guest James Osterhaus Posted June 28, 2001 Posted June 28, 2001 If a client wants to terminate a profit sharing plan and start a 401(k) plan. Is there a required waiting period between the termination of the profit sharing plan and the starting of the 401(k) Plan. I don't think so and I couldn't find any data on the subject, but I just need to be sure. Thank you James
david rigby Posted June 28, 2001 Posted June 28, 2001 Is there an important reason to terminate? If not, a better approach would be to amend the existing plan to include a 401(k) feature. I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
Guest michael4509 Posted July 17, 2001 Posted July 17, 2001 what are the positives and negatives surrounding terminating a profit sharing pension plan?
rcline46 Posted July 17, 2001 Posted July 17, 2001 The only reason for an ongoing company to terminate a profit sharing plan is to put money in the pockets of its employees. There is no other reason. Especially if they are installing a 401(k) plan. BTW there is no such thing as a 401(k) plan! Its just a handy shorthand. Code Section 401(k) allows a Cash or Deferred Arrangement (CODA) to be attached to a Profit Sharing Plan, so a 401(k) plan is merely a Profit Sharing Plan allowing pre-tax deferrals.
MWeddell Posted July 18, 2001 Posted July 18, 2001 Commenting on the legality, not the advisability, of whether one could terminate a profit-sharing plan and start up a new 401(k) plan, yes. Treas. Reg. 1.401(k)-1(d)(3) is inapplicable. There's no legal reason why one couldn't do this.
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