Freezing Money Purchase Pension Plan

[chris]

MPPP has a last day of the plan year requirement with respect to allocation of contribution. Plan year ends October 31. Employer required to contribute 8%. Employer going to amend plan to:

1) Amend contribution formula to 0% of compensation for plan year ending Oct 31, 1999; and

2) Freeze MPPP by having 0% of compensation formula apply to all following plan years.

1) above is O.K. because of last day of the plan year requirement, i.e., no §411(d) cutback because no accrual until Oct 31, 1999.

With respect to frozen plan, plan operates as if ongoing plan except for fact that no further contributions will be made, unless, perhaps, employer decides to turn it on again. Thus, vesting, etc. applies as it normally would.

Any comments or suggestions??

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[Dowist]

What do you do with the forfeited amounts? It seems like more trouble not to 100% vest.

If the forfeitures are allocated only to current participants (no new participants added because plan is frozen) you could have coverage problems. Also you'd have to allocate the contributions on the basis of compensation, which means you'd have to collect data and all of that. Theroetically the amendment itself could be discriminatory under the regs. I don'think you have a partial termination issue, but you'd better check the regulations (there is a special rule for partial terminations and pension plans).