Merging plans

[david rigby]

I have a client with a conventional DB plan, and a subidiary with a mirror plan. The only difference between them is special minimums that apply to accruals prior to a specific date. Client wants to merge. My question is what would be the appropriate effective date to do so: 12/31/2001 or 1/1/2002.

I think 12/31/01 is valid as long as we complete the amendment(s) by 3/15/2002. However, anyone see any downside to this? A merger as of 1/1/2002 would give us much more time to do all the paperwork, but it gives a one-day plan year. Does this mean I have to do a 5500, including a Schedule B for a one-day plan year? I think the answer is yes, but I looking for feedback on pros and cons of each alternative.

[AndyH]

I wasn't aware of anything that would allow you to merge retroactively.

Don't the assets have to be moved or at least re-registered by the merger date for the merger to have taken place, among other requirements?

As far as I know, 12/31/2001 isn't now an option. I'm pretty certain that a 5500 filing is needed either way until the assets move or are re-registered.

[MGB]

I agree with Andy. I struggled with this numerous times last year with many clients wanting to do retroactive mergers (due to high contribution requirements in one plan and not the other). The requirement that all assets be available for all liabilities of the plan is not satisfied until the asset transfer takes place.

Of course, this doesn't answer your original questions of which date is better and whether you need a 5500 if it is on 1/1. I don't have a clear answer on that.

[RCK]

I just put a 5310-A filing in the mail this morning for a plan merger, so this is a hot topic for me.

That filing has to be filed at least 30 days prior to the transaction date unless you meet one of the exceptions, and the only one that could be applicable here would be if one of the plans was de minimus compared to the other. That is, the total liabilities of the smaller one have to be less than 3% of the assets of the larger one.

So doesn't that push your merger date out until at least February 10?

[MGB]

RCK,

I used the same argument a few times last year and kept getting defeated. The problem is that a filing of a form doesn't restrict you from what you actually are doing. If we assume a retroactive merger actually could have occurred, then all that happens is that you pay a penalty for filing the 5310A late.

That is when I latched on to the "assets available" reasoning (actually, a lawyer used it on me).