What happens when a plan that is not amended for GUST is merged into a

[Guest slt]

What happens when a plan that is not amended for GUST is merged into a plan that has been amended for GUST? I understand the normal merger rules (where I must preserve accrued benefits, optional forms, actuarial factors, etc.) but what about the effective dates? For example, the surviving plan was amended for GUST over a year ago. Therefore, for some provisions, it has an effective date that would be earlier than a plan that was amended for GUST right now (e.g., the "greater of" requirement for GATT changes - determining actuarial equivalence - to comply with 411(d)(6) would end earlier for the plan already amended for GUST). Any ideas? My thought is that the merged plan that does not survive would no longer have a separate existence (of course, it would not be considered terminated, since then I would definitely have to amend), so I shouldn't even worry about this - as long as the effective dates are correct for the surviving plan that has already been amended. However, counsel is telling me that I may have to worry about this. Any thoughts? My feeling is that that would be a terribly onerous administrative nightmare! As always, I greatly appreciate the help I get from everyone on these boards!

[david rigby]

I have no cites, but my perspective on this is the analogy to a terminated plan. Until the merger date, you have two plans, each which must be in compliance with GUST (operationally) and must be amended formally by the end of the 2001 plan year. If the first plan is never amended formally, then it has never been brought into compliance. (The compliance in form as well as in substance.)

Also, would you have a short plan year at the date of merger? If so, seems that you would automatically create the last day of the 2001 plan year.

My vote is to amend.

[Guest slt]

Thank you for your reply. I can see what you are saying. However, my thoughts are that the plan doesn't terminate when it is merged into the other plan (hence the reason why I do not have to fill out all those PBGC termination forms if I have a DB plan), so why should I amend it? Also, when I merge the plan into the plan that has already been amended, I don't have to go into the IRS for TWO determination letters. I still go in for one. Under your theory, wouldn't I have to get two determination letters for one plan? :confused:

[Guest slt]

As I am apt to do, I am going to see if I can provide an answer to my own question!!! Pax, I think you have a very valid point about the operation issue and I think my solution doesn't address this at all.

So, in light of that, I think the following may work: merge the plans together and have the non-GUST amended plan rely on the GUST amendments made by the other plan (i.e., have one plan document) BUT in the special appendix to the Plan (Where I would preserve accrued benefit formulas, distribution options, etc.), I should set out all the effective date exceptions (e.g., I would say for purposes of the merged plan, lump sums are automatically cashed out on 10/10/97 (if that's when the plan operated under this rule) and not on 8/5/97 as was done under the plan that is already amended for GUST).

I still don't think, however, that I would have to amend the plan for GUST first and then merge the plans together, because that would mean in essence that I should go in for two determination letters.

[david rigby]

When you merge the plans, do you not have a final 5500 due for the first plan, probably showing a merger date? If so, that emphasizes the 2001 plan year?

[Guest slt]

An answer to our question!

http://www.irs.ustreas.gov/bus_info/ep/determs.html

Relevant info below:

Merged Plans:

When two or more plans are merged, how many Form 5300 Applications are necessary?

Only one Form 5300 application needs to be submitted for the ‘surviving plan’.

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Merged Plans:

If there are two plans that are being merged together, is it necessary to have both plans separately amended for new tax law prior to the plan merger?

It is the position of the Service that it is sufficient for only the ‘surviving plan’ to be amended as long as its amendments are written to also retroactively amend the now ‘merged plan’ to comply with the new tax law requirements. A favorable determination letter for the surviving plan may be relied upon with respect to whether the merged plans were timely and correctly amended for new tax law.

With respect to current law, if two or more plans are merged prior to the end of each plan's GUST remedial amendment period, the plans may be amended to satisfy the GUST requirements in either of two ways:

Each plan can be separately amended for GUST prior to the merger; or

The requirement to amend for GUST can be satisfied through the surviving plan. In this instance, the GUST amendments must be adopted within the GUST remedial amendment period of the surviving plan and the merged plan(s) (see below), and the appropriate amendments must apply to each of the plans that have been merged into the survivor. Thus, some of the amendments to the surviving plan may apply to one or more of the merged plans and not to others, or may apply at different times to each of the merged plans. This would be necessary, for example, if different choices or elections were made in the operation of the merged plans prior to the merger.

For example, if the merged plan provided for a QJSA (an IRC 411(d)(6) - protected benefit) while the surviving plan did not, the surviving plan must be amended to preserve this option for benefits accrued under the merged plan. The QJSA provisions of the surviving plan should also apply to the merged plan to the extent necessary to allow the plan to comply with current law prior to its merger into the surviving plan.

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Merged Plans:

What is the controlling date for timely adoption for GUST of merging/surviving plans?

If only the surviving plan is amended, the GUST amendments must be adopted within the GUST remedial amendment period of the surviving plan and each merging plan. Otherwise, each plan must be amended separately for GUST prior to the close of its GUST remedial amendment period.

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Merged Plans:

At the time of merger, what should be the qualification status of the merging plans?

Merging plans must have been timely amended for all TRA 86 requirements, including IRC 401(a)(31) and 401(a)(17).

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Merged Plans:

What plan documents of the merging plans, if any, should be included in the GUST application for the surviving plan?

For each plan merged out of existence, the latest determination letter received by the plan sponsor with, if necessary, copies of the signed and dated amendments for IRC 401(a)(31) and 401(a)(17), plus a signed and dated copy of the plan document currently in effect. Submission of these documents will expedite the determination process.