Money Purchase Plan merger

[Guest jhilliard]

I have a client who recently merged his money purchase pension plan into his 401(k) profit sharing plan. The effective date of the merger was 12/31/01. The problem is that the funds technically didn't move out of the related trust until January 2002. The question being does the money purchase plan need to meet minimum funding requirements for the year 2002? How will this affect the 2002 5500 reporting?

[Archimage]

The assets became part of the profit sharing plan on the effective date of the merger. The last 5500 for the MPP should have been for 2001.

[ErisaGeek]

I feel that even though the merger date was 12/31/01 you would not be able to wrap up the 5500 for the money purchase plan since the money purchase money was still not transferred until January 2002. The money was still in the trust beginning 2002.

The last 5500 should be filed when there is no penny left behind in the trust. I would not worry regarding the funding requirements for 2002 as long as the 204(h) notice was done in a timely manner indicating that the money purchase contribution formula would be zero after 12/31/01.

[WDIK]

I agree with Archimage. It is the "legal" date of the transfer, not the actual date.

[Archimage]

The assets at 12/31/01 became part of the profit sharing plan. It became no different than two separate brokerage accounts for profit sharing assets and 401(k) deferrals.

[E as in ERISA]

The trust documents should also have been amended effective 12/31/01, so they should indicate that the new trustee has ownership of the assets as of that date even if it does not have actual possession. It's no different than any other case in which title is transferred prior to the physical transfer of the asset (house, car, etc.). The fact that the former owner is still in possession doesn't make them the owner.

[KJohnson]

In a Q&A session at the ASPA conference--I believe in either 1998 or 1999-- this question was asked and the IRS reps gave the same answer as Archimage.

[Guest jhilliard]

Thanks for your help everyone....The Documents were amended and the plan was frozen effective 12-31. I think we are OK, I have done further research and found teh Document to be the overall ruler of assets.

Thanks again!

[RCK]

Keep in mind that convincing your auditors of the correctness of this position may be more difficult than achieving a concensus here.

I went through a similar situation involving the merger of two DB plans last year, and it took months (literally) to convince our Big Four auditors that even though the assets were still in the extinct plan's former trust at the end of the year, they belonged to the surviving plan. That is even with the benefit of their national office.

RCK

[KJohnson]

I went back and checked and it was question 75 of the 1998 ASPA Q&A's. Unfortunately I do not have them in electronic format where I could simply paste them here.