Freezing a Money Purchase plan mid-year

[PMC]

Concerned about the accruals and funding requirements under the MPP.

Employer with a Standardized MPP wants to amend to a 401(k) effective 1-1-02. The MPP plan year is 5-1 to 4-30. The MPP calls for an ER contribution of 5% of plan year compensation.

It seems the employer could amend the MPP plan to change the plan year so that it ends 12-31-01 and fund the MPP contributions to that date and then continue as a 401(k) with the new 1-1 plan year.

But the employer would like to keep the 401(k) plan year as 5-1 (coindcide with FY). Could they amend the MPP with a rate of 0% as of 1-1-02 and change to the 401(k) as of that date?

The employer could establish a 401(k)effective 1-1-02 with a 5-1 plan year and amend the MPP effective 12-31-01 changing the plan year to 1-1 and with a 0% going forward and then merge the MPP

into the 401(k), but they would prefer not to. But is this the best way to do it?

Suggestions?