Effective Date of Money Purchase Plan Merger (12/31/01 OR 1/1/02)??

[Guest T-BONE]

Assume a client has a 401(k) and money purchase plan with both plan years ending 12/31. The money purchase plan has a once a year allocation to participants employed on 12/31. The employer wishes to merge the plans in order to take advantage of the EGTRRA changes which allow increased employer deductions of contributions to a profit sharing plan.

When should the merger be effective? 12/31/01 or 1/1/02? Can the final money purchase plan allocation that is due as of 12/31/01 be made after the effective date of the merger? Any other issues?

[rcline46]

This has been discussed many times. Merger 12/31/01 at close of business is correct way. This was confirmed Monday in Washington by spokespersons from the IRS. Otherwise you will need another 5500 for 02, and if a Standarized plan may require another contribution.

You DO NOT 100% vest unless you so desire. Merger should state MPPP contribution is due. Don't forget the 204(h) notice!