Pension merger into 401(k) plan

[Guest Tbrown]

I have just finished the merger of a money purchase plan into a profit sharing 401(k) and am working on the GUST document on the 401(k). The pension plan had a 2/20 vesting schedule which the client wants to keep. I know that there is no requirement to 100% vest the pension money in a merger. However, the 401(k) plan has an immediate vesting on all contributions (profit sharing and match). The client would like to keep this. Does anyone see a problem with the employer profit sharing portion being 100% vested and the merged money purchase being subject to 2/20 vesting (outside of the obvious document problems that such an arrangement would create)?

Thanks,

Tim

[E as in ERISA]

No.

[Mike Preston]

I might be a little concerned that the merger has already taken place and the documentation might not reflect what you want.

[mbozek]

What were the employees told about the merger?-- A Summary of material modifications must be provided along with a 204(h) notice if the mp contributions are being reduced. There is no problem with keeping the 2/20 vesting for the mp allocations provided it does not confilict with disclosures to participants and is clearly stated in the plan. There will need to be separate accounting because the mp benefits must be offerred as a J & S annuity. Also what happens to forfeitures from the MP accounts? Rev. rule 2002-42 contains the requirements for merging mp plan into another plan.

[Guest Tbrown]

We've already issued the 204(h) notice, done the plan amendments, etc. This is just the first time we have done one where the p/s contributions are 100% vested.

Thanks for the input.

[rcline46]

Also note that if the 401k/psp plan is all 100% vested, you might not have any forfeiture allocation language in the document! Check and add if necessary!