Plan Mergers

[Guest MCarey1]

I have an integrated money purchase pension plan and a non-integrated profit sharing plan. We are merging the MP into the Profit Sharing. Will we need to continue to integrate the allocation that is the money purchase contribution? My boss says we will need to maintain the integration.

Marybeth

[Blinky the 3-eyed Fish]

You can change the allocation formula at will as long as no one has satisfied the conditions to receive an allocation. For example, if there is a last day requirement to receive the allocation and this is a calendar year plan, you can do what you like to the formula.

Is there something more to this situation? Because your question reads almost like your boss is saying once you have the integrated allocation, you can't get rid of it.

[Guest MCarey1]

Thanks for your response Blinky.

My boss says that when you have two plans, only one of them can be integrated. His assumption is that once merged, we will need to maintain that integration on the allocation that was integrated before.

Marybeth

[Blinky the 3-eyed Fish]

Your boss is right that in order to be safe harbor plans the allocation formula can be integrated in only one of plans. But as for needing to maintain the integrated formula in the future, that is another story.

Although, I imagine you would want to maintain the integrated formula to provide a higher level of benefits to the higher paid employees, so this discussion is probably moot.

[Guest pjb]

Blinky, if they decide to eliminate the integration whether effective at merger date or later, I believe they will need to provide a 204(h) notice. Do you agree?

[Blinky the 3-eyed Fish]

Anytime the rate of future accruals will be reduced in a plan subject to 412 you will need to provide a 204(h) notice. So, no matter what the allocation formula, integrated or not, you will need to provide the notice in accordance with the rules prior to the merger.