Allocation of MP/PS combination plan assets to new GUST paired plan

[Guest dgoldie]

How does one allocate assets from a MP/PS combination plan, which is a prototype plan with Schwab, to separate MP & PS accounts to comply with required GUST restatement? Schwab wants Plan Administrators to submit a letter of instruction indicating how to allocate the assets of the plan between the two new, restated plans. There have never been any employees and maximum dollar contributions have been made every year according to the formula 15% PS & 10% MP. Would one simply allocate assets 40% to PS & 60% to MP?

[Mike Preston]

I think you need to back up a bit and give some detail. Are you saying that you previously had a combined trust, with two plans, and that Schwab now wants you to create two trusts? If so, why? If the combined trust was ok before, what makes it not ok now?

I've used combined trusts for years and there is no need to un-combine them that I am aware of.

Maybe a different financial institution wouldn't require this?

[Guest dgoldie]

I have a Schwab Money Purchase Pension Plan, also called a Combination Keogh as it has Money Purchase Plan and a Profit Sharing Plan that are combined. It is a Schwab prototype plan. According to Schwab, all existing Schwab prototype plans have to be amended and restated to comply with the new GUST requirements by the end of the year. To make a Combination Keogh plan GUST-approved, Schwab says they can no longer hold assets in one Schwab account -- there must be two accounts, one Profit Sharing Plan account and one Money Purchase Plan account. In the past, the Money Purchase and Profit Sharing Plans were combined into one Schwab account. Schwab calls the new plan a "paired plan." They want me, the Plan Administrator, to instruct them as to how to divide up the existing assets in the current plan between these two new accounts. I am assuming that I simply need to divide the assets in proportion to how they were contributed (15% Profit Sharing and 10% Money Purchase) since I have always been the only participant and there have been no distributions.

[Mike Preston]

If you are happy with Schwab, and are willing to go along with dividing up the accounts, and you have always contributed the maximum (25%), I see nothing wrong with doing exactly as you have indicated.

[Guest dgoldie]

Okay, thanks for your insights Mike.