Conversion of 0% MPP to PSP

[Lori Foresz]

Hi,

We are working on a GUST restatement for a one-person 0% money purchase plan. Because the idea of a 0% MPPP is strange to me, I suggested restating the plan as a discretionary PSP. Of course, we would retain the J&S and withdrawal restrictions associated with the MPPP, but just allow for discretionary profit sharing contributions instead of a 0% MPPP (which seems like a frozen plan to me).

Are there issues I am missing? Any surprises in store? Is anyone has come across any or knows a reason that this is not a good plan, your thoughts are greatly appreciated!

Thanks

[mbozek]

A PS plan is required to make substantial and recurring contributions in future years. A 0% MPP does not require any employer contributions ever. The MPP plan is used as a place to park rollover money so the owner can take a loan, e.g., in a consulting business that will never turn a profit.

[Lori Foresz]

Hi,

Thanks. I had thought about the requirement for recurring contributions. So, if recurring contributions are not made to a PS, could the PS be considered disqualified or could the IRS/DOL require the employer to terminate the plan? Alternatively, a 0% MPPP is a frozen plan that can exist forever?

Thanks for the thoughts.

Lori