Terminating Plan... Client has other plan (I am not administrator)

[K-t-F]

An old PS plan that has had no contributions for years is going to terminate. The client has another plan (I think DB plan). Does he have to offer the participants the option to roll their $ into the remaining plan if they want?

[Guest FormsRmylife]

Does the DB plan (or whatever it is) provide for the acceptance of rollovers under its terms? The law does not require that a plan accept rollover, it must only agree to make rollover/transfers for lump sum distributions. If the other sponsored plan accepts rollovers, then an employee could elect to roll his PSP account into the other employer-sponsored plan. The employer could amend this other plan (assuming this is not prototype that lacks this option) to remove the language accepting rollovers before it terminates the PSP. Of course this amendment would have to apply to all rollovers from any source and should not be a sham that is kept in place only for the next few months.

[RCK]

If the other plan is a DB plan, I would think that the odds are that it won't accept rollovers. A rollover into a DC plan is pretty straightforward--just an increase in the account. A rollover into a DB plan is a little harder to deal with--it can't really increase the DB benefit, so at the minimum it is going to create a recordkeeping problem that the adminsitrator would rather not have.

RCK

[david rigby]

In direct response to original question: No.

[K-t-F]

Thank you... I will tell the client to liquidate and roll into IRAs. DB plan (if it is a DB plan) will be better off without the added $ I am gathering since it will possibly reduce the amount that can be contributed. On the other hand, if they are finding it difficult to fund the DB plan then adding the PS rollover will help them... correct?

[david rigby]

1. Probably not advisable to tell them to "liquidate and roll into IRA's." The participant will (generally) be the one who decides where it goes. The plan may already have some language that instructs on the process of plan termination.

2. I don't think the addition of rollovers should impact the amount of employer contribution. Using rollovers to fund employer contribution is an oxymoron.

[K-t-F]

I am not going to instruct the participants to roll into IRAs... simply informing them that they can take the $ and run (less withholding) or roll into some other retirement vehicle and not pay taxes.

What was meant by the $ going into the DB plan is... doesnt the addition of additional outside $ affect the balance of the trust as a whole and therefore the added $ will skew the calculations and reduce the expected contribution.. as if the assets had a large unrealized gain? or will the $ simply be part of the plan and need to be accounted for separatly?

[Blinky the 3-eyed Fish]

The latter. Rollovers do not impact funding at all as they are a separate source altogether and must be tracked as such.

[david rigby]

Of course. The rollover $ is an increase in that pot of assets, but (surprise!) it also represents an increase in the liability of the plan.

[K-t-F]

Ok Blinky... then I will tell the owners they have that option (rolling the $ into the other plan) if they dont want to roll the $ into IRAs. Honestly, I am not going to worry about it too much since once the plan is terminated it is out of my hands. Of course I am assuming that if they roll the $ into the other plan they have to offer it to the other participants in the terminating plan... cant discriminate now can we.