QRP Conversion

[Guest Mona]

Currently I have a QRP Money Purchase Plan with a brokerage firm. They tell me I need to Amend and Restate it by year end. In addition, I want to change to a QRP Profit Sharing Plan for 2002. They tell me I can do this in one of two ways. First, convert (merge) or second, terminate the Money Purchase Plan. If I choose the former, they say I will need to file a form 5500 with the IRS. They also say the proceeds from the MMP will continue to follow the distribution rules of the MMP and in 20 years when I retire, I will need to waive the Joint servival annunity every time I take a distribution. This seems like a nightmare and will require me to maintain good records separating the proceeds that originally came from the MPP from the PSP. If I terminate the MMP they say I need to file forms 5500 and 5310. Since I am the only one in the QRP and do not see that changing, it would appear the best route to go would be to terminate the MPP. Suggestions whivh way to go would greatly be appreciated.

[jpod]

I would vote for termination; you can then roll the money into your new profit sharing plan or an IRA, and preserve the tax-deferral. You still must amend your MPP, however, to comply with the so-called "GUST" changes in law, even if you terminate the MPP before year-end.

You should already be subject to the 5500 filing requirement, if your MPP has at least $100,000. Terminating the MPP would not trigger any new 5500 filing obligations.

Filing a 5310 with IRS in connection with the termination of a qualified plan is a right, not a requirement. Usually it's the prudent thing to do; sometimes it's not warranted. If you've never, ever, had any employees whatsoever since you set up the MPP, and you are not an owner of any other incorporated or unincorporated trade or businesses, you can probably feel comfortable without filing a 5310, but that is a difficult question to answer via a message board.