Section 204(h) Notice when MPP merged into a PSP

[Guest JDansa]

Hello!

I am new to this area so please bear with me! I am working with a small company who, about one year ago, decided that it was going to merge the money purchase pension plan into the profit sharing plan. No amendment was signed to effectuate the merger and a section 204(h) notice was never given to the Participants. Instead, the MPP account was transferred into the PSP account. This is reflected, obviously, on the statements. I contacted the IRS on a "John Doe" basis. The agent said that if this truly is a merger and not a plan termination than an amendment to effectuate the merger can be done by September 30, 2003. However, I am also concerned that a 204(h) notice was not given out prior to the account being transferred. How do I correct this situation?

[E as in ERISA]

I don't think that the IRS' answer is correct.

[chris]

Also, I think the failure to give the ERISA 204(h) / IRC 4980F Notice re ceasing benefit accruals means the MPPP contribution is still ongoing until you cut it off whether you had an amendment in hand or not. You would also need to do a new plan doc. reflecting the fact that a merger occurred and preserving the MPPP options with repsect to the MPPP funds held in the PSP as well as restricting the PSP distribution options to the PSP funds.

[Guest jfp]

Probably a wild goose chase, but are you sure the MPPP is/was subject to Title I of ERISA?

If it covered only the sole owner of a business, or the sole owner and his or her spouse, or if it covered solely partners of a partnership, it is not subject to 204(h).

[Appleby]

I don't think that the IRS' answer is correct.

Actually…the IRS is right- as they were responding to the amendment question, not the 204(h) notification...If it is truly a merger, then it is sufficient to amend the surviving plan, providing the amendment is retroactively done to amend the MPPP for the new tax laws.

[E as in ERISA]

What I'm saying is that I don't think that you can throw all plan amendments -- including an amendment merging an MPPP into a PSP- into the GUST remedial amendment period. You can't do a cutback amendment retroactively unless there is a specific provision for it. And the GUST provisions wouldn't cover that type of cutback.

[KJohnson]

The GUST RAP applies to the following in addition to everything that you would typically consider a GUST amendment

All disqualifying provisions of new plans adopted or effective after December 7, 1994, and all disqualifying provisions of existing plans arising from a plan amendment adopted after December 7, 1994;

In other words, you are allowed to "fix" these things during the GUST RAP. Whether you could "shoehorn" the failure to amend a plan to reflect a merger into this, I have some doubts....the disqualifying provision arose from the absence of an amendment rather than the amendment itself.

The 204(h) notice is also a stumbling block as noted above.