Money Purchase Plan - no last day provision - can you fund MPPP contribution if participants terms during PY?

[Guest goaliemom]

I have a MPP that wants to pay out participants as soon as possible. Most if not all of them are NHCs. The client wants to allocate the 5.7% MPPP contribution if they terminate and submit distribution forms. There is a 1000 hour requirement, no last day provision. This would eliminate having to pay the distribution and then paying a another distribution when the allocation for all other participants is completed after the end of the PY. Please identify a site if you can. Plan doc states time of ER contribution to be "may be paid to the TTEE/Custod in one sum of in several installments on any date or dates. Is there is reg against this? I know it's not conventional, but alleviates participant waiting until after PYE for distribution and also have 2nd distribution to completed.

Please help!

[ccassetty]

One of the things that I would be concerned about is not really a plan issue. How are the faithful employees who remain going to feel about having to wait until year end to receive their contributions when they see terminating employees receiving their contributions right away? Could be a can of worms the employer is opening here. I could see people wanting to "terminate" just to get the contribution then get rehired. I could see long term employees being upset and productivity going down. I think there are bigger issues here than making life easier for distributions. What you are doing is rewarding people who terminate and in business 101 you learn that you always get what you reward.

A better solution, since the plan has no last day rule and the employer is inclined to be generous to terminating employees, is to eliminate the 1,000 hours rule and just start making contributions payroll by payroll. This accomplishes the employer's wish to simplify distributions but doesn't overly benefit terminating employees compared to those who stay.

From a plan standpoint, though, I think it could be done as you describe.