Multiple Employer Plan

[jpod]

401(k) plan is a multiple employer plan. (It is NOT a multiemployer plan). Plan already has a GUST determination letter and has been amended for EGTRRA.

One participating employer wants to cease its participation in the plan and have its employees' accounts distributed to them. The employer has no expectation of establishing another plan, at least not within 12 months of when the final distribution might be made to its employees. This employer is not a 414(B), ©, (m) or (o) member with any other participating employer.

Questions:

1. Does the employer's cessation of participation constitute a "termination" permitting distributions? I think it does, because of the mandatory disaggregation rules in the 401(k) regs. If so, can I get a determination letter via Form 5310?

2. If not, then what can/should I do? Will a spin-off followed by an immediate termination work? Seems kind of silly that I could do this, but I could not do alternative 1.

[RTK]

For what it's worth: I am not sure the disaggregation rules lead to the conclusion that the "plan" has terminated. A mutliple employer plan is a single plan, even though treated as separate plans for many of Code purposes. You might actually have a better argument that distribution is permitted because of a severance from employment (under the EGTRRA rules) since the participants are no longer employed by the employer maintaining the plan (although that does seem a little bizzare).

That said, I think you would be better off with a spin off/termination, particularly if you wanted a determination letter on the termination.

[mbozek]

I think the way rules work is that the employer can discontinue participation in the plan but the plan is not terminated. See Reg. 1.413-2(a)(3)(iii). Also check instructions to 5310 form.