Distributions from Terminating DC Plan

[Just Me]

We have an old frozen DC plan which has only terminated vested participant accounts remaining. All of the remaining account balances are over $5,000, and none of these participants have or will consent to lump sum distributions.

The §411 regs say that you can terminate a DC plan with a lump sum provision and force out payments without participant consent even if the balances are over $5,000, UNLESS the employer maintains other DC plans, which it unfortunately does.

So, could we add a J&S form of benefit payment to the plan and terminate the plan, then buy commercial annuities to get the assets paid out so we can shut down?

Or are we stuck with maintaing a plan document, trust, 5500s, etc. etc. etc.

[WDIK]

Rather than maintaining separate documents and preparing separate filings, have you considered merging the plans?

[Just Me]

Yes, but the company is closing down eventually (bankrupt) so we wanted to be able to get rid of the frozen plan sooner, and keep the active 401(k) around until the last moment for the benefit of the remaining employees.

[mbozek]

In a terminating MP plan the employer must still make a J& S annuity available when forcing out payments to participants with account balance in excess of 5k. Why not do a trustee to trustee transfer of MP assets to the 401K plan for now to terminate the MP plan and then distribute the MP assets when 401k plan terminates. The 401k plan will have to offer a J & S annuity for the MP benefits when it terminates.

[WDIK]

mbozek:

I read Just Me's post differently than you did. I understood that the plan in question currently does not have J&S provisions and that Just Me was wondering if those provisions could be added so that annuities could be purchased for the participants, thus facilitating the closure of the plan.

In other words, they can't force out the participants with a balance of over $5,000. Can they force them out through the purchase of an annuity if they have appropriate J&S language?

[Just Me]

>>In other words, they can't force out the participants with a balance of over $5,000. Can they force them out through the purchase of an annuity if they have appropriate J&S language?>>

Yes, that's my question. Thanks for the synopsis - anybody know of a reason why this wouldn't work? Alternatively, has anyone done this with success?

Just Me

[Guest CAM223]

We have a terminated money purchase plan with a former employee that refuses to take her distribution. She has over 5000 in plan. Can plan pay her lump sum without waiver of j&s? We thought that you are supposed to buy an annuity for her but how could you do that without birth certificates and info on spouse?