Notice Requirements Applicable When Money Purchase Plan is Merged into

[Guest Edward McElroy]

A client maintains both a money purchase plan and a profit sharing plan. The employer is interested in merging the plans effective 1/1/02. A consultant indicated that the employer needed to provide a 30-day notice to participants apprising them of the plan merger. Is this accurate? I was unable to locate any authority that would require a 30-day notice being provided. Any thought? Thanks. Ed

[david rigby]

Not sure, but I'll try.

If the MP plan is amended to reduce future accruals, an advance notice is required. Section 204(h) of ERISA. This notice currently requires at least 15 days. That is, the notice must be given after the plan amendment is actually adopted, but at least 15 days before it is effective.

There is a proposed (I think) reg. from the IRS changing this time period to "reasonable". As yet, an undefined term. However, in other cases, this term has sometimes meant "at least 30 but no more than 90 days." Thus, 30 days would take care of the current rule and the "new" rule.

[Belgarath]

Pax - the modifications to ERISA 204(h) are part of EGTRRA - section 659. And the penalty for non-compliance is pretty stiff - $100.00 per day, per individual who has not received the notice.

I suspect that until some regulations are issued defining the "reasonable" period that the 15 day notice is still fine, but you sure can't go wrong being more conservative!