Merger of MPPP to 401(k) and on-going loan repayments

[Guest andmik]

There is a Money Purchase Pension Plan which is intending to become a frozen plan.

There is contemplation to merge it to the 401(k) plan after consideration of all the potential issues that might be caused and the downside to the 401(k) plan features.

One dilemma is whether either or both of the scenarios is a legal option under the MPPP.

1. Can loan repayments be accepted back into the MPPP while frozen?

2. If the plan is merged, can loan repayments continue to the 401(k) plan, being paid to the MPPP source on-going, since it the source the loan was borrowed from?

Any insight will be appreciated. I find nothing regulatory-wise that supports an answer either way.

Thanks in advance.

andmik

[mbozek]

The loan repayments can be continued to a frozen MP plan as long as it is not terminated. If the plan is merged, the loan repayment can be continued to the 401(k) plan. However, there will be restrictions on inservice withdrawals required on MP plan account balances after the merger. See Rev. Rul. 2002-42 (issued this week) for IRS rules on merger of mp plan.

[Guest andmik]

MJB,

Thanks for your quick response. Based on your feedback it looks like we have the ground covered with this.

Thanks for the reference to the guidance. I was aware that the IRS was intending to issue some on this subject, but did not realize it was released this week. I will take a close look at this.

Sincerely,

andmik