Amend Plan to provide for transfer of assets to other e/er plan....

[chris]

E/er has a frozen MPPP. E/er also maintains a PSP. Assuming all participants are the same in both plans, wouldn't it be possible to amend the MPPP in order to provide for the transfer of all assets and liab's to the PSP upon termination of the MPPP. MPPP has three parcels of RE inside. Plan and e/er would like to keep from having to cash out the RE in order to pay out participants if they chose an in-pocket distribution instead of rollover to e/er's PSP. Thought I had run across this scenario on here, but it's been some time. Thanks for any suggestions....

[Blinky the 3-eyed Fish]

The mechanism is not a transfer of assets upon termination, but rather a merger of the MP plan into the PS plan. With a merger you also don't have to 100% vest the participant dollars in the MP plan. Keep in mind that the merged MP dollars need to retain the J&S features and the distribution restrictions before NRA.

[chris]

Is there still an exception to the 5310-A filing requirement where two def. cont. plans are involved as long as acct. balance is same before and after, etc......? Also, I guess all issues re plan mergers in general would need to be addressed....e.g., new plan doc to reflect merger and to preserve/restrict the ben. options, all assets moved by plan year end so as to be able to file a final 5500.........??

[Blinky the 3-eyed Fish]

Yes on the first one.

Whether you need a new plan doc or not depends on how your current document reads and what language you can incorporate into an amendment.

[chris]

Given that the surviving plan will be the PSP and the merged plan is an MPPP, there is obviously no language regarding preserving/restricting distribution options within the current PSP plan document. Therefore, I would assume that a new PSP plan doc would be in order referencing the fact that there are assets in the PSP from a merger with a MPPP and providing for the requisite distribution options/restrictions. I guess the effective date would be the first day of the current plan year...... Also considering a short merger agreement signed off on by both plans setting forth the effective date of the merger and referencing the transfer of assets, etc.. from MPPP to the PSP and authorizing the trustees of each plan to take the necessary actions to complete the merger. No 204(h) notice should be necessary b/c the MPPP is frozen and a 204(h) notice was issued at that time. Any suggestions...? Thanks.

[chris]

Actually terminating the plan and allowing for the participants to chose how they want the distribution, ie, rollover, in-pocket.... is the only way to purge the protected benefits/distribution options, correct? If the MPPP was terminated and all participants chose to rollover their balances to the PSP, then assuming the MPPP allows for in-kind distributions, the RE could be transferred to the PSP. Thus, the RE investment is preserved AND there are no protected benefits/options that have to be tracked in the future. So I guess merger vs. termination will mainly depend on how many participants would not elect to rollover to the PSP.

[Blinky the 3-eyed Fish]

You are correct that terminating the plan and allowing for distributions is the way to remove the protected benefit options, but is that really what you want to do? I suppose if you are not concerned with vesting everyone, then it's okay, but I don't know many clients that like to give away dollars when they don't have to.

I am not sure what you mean by "...assuming the MPPP allows for in-kind distributions.." First, a MP plan cannot have distributions before NRA. Second, this doesn't matter.

So, I think it boils down to simply weighing whether or not you want to:

a) terminate the plan and provide 100% vesting

b) track separate MP monies transferred for J&S and distribution restrictions

c) just make it so that all the monies in the PS plan are subject to J&S and are not available for distribution before NRA. That way you don't have to track the MP transferred dollars. (Note that this is only available if you currently don't have pre-NRA distribution availability in the PS plan. You couldn't take that away now.)

[chris]

The "in-kind distribution" comment deals with whether or not the RE will have to be liquidated if the MPPP is terminated. If in-kind distributions are allowed for in the MPPP document and the MPPP is terminated and all participants elect to rollover to the PSP, then the objective of preserving the RE investment within the plan is achieved without having to deal with the protected benefits/restrictions issues. The two objectives are: 1) maintain the RE investment; and 2) get rid of the MPPP.

[Blinky the 3-eyed Fish]

My mistake. I was thinking in-service distributions when I responded.

Any one of the choices I posted before can achieve your goal. If the plan currently does not allow for in-kind distributions, you could always amend it to allow for it.