Merger of DB Plans - Overfunded Into Underfunded

[LIBOR]

Here's the situation - there are 2 DB plans within a controlled group - Plan A an underfunded salaried plan and Plan B an overfunded frozen plan with only term vested participants.

The employer purchased annuities for all of the term vesteds in Plan B and now wants to merge Plan B, which now has only the excess assets after the purchase, into Plan A - these excess assets will now be available for the participants of Plan A.

My contention is that under the exclusive benefit rule all assets of Plan B have to be used for the participants of Plan B and what they should do is merge first and then pay out benefits by way of , for example, a plan termination.

Does anyone agree ?

[Guest dsyrett]

But there are no participants in Plan B are there?

[Guest Steve C]

I'll admit that it's been a few years since I last dealt with plan mergers, but I believe that the 414(l) regs simply require that participant "benefits on a termination basis" be protected. Here the former Plan B participants have been protected by the annuity purchase, so residual assets can be merged into Plan A.

fwiw