Freeze/Merger/Termination?

[chris]

E/er maintains a PSP, MPPP and a 401(k)(safe harbor met by 3% nonelective contribution). There are investments within the MPPP and PSP which are locked in at favorable rates. E/er wants to get rid of the duplicative administrative costs with maintaining three plans. E/er is trustee of PSP and MPPP assets. 401(k) assets are participant directed. E/er would like to end up with just the 401(k) plan and thus be obligated for the safe harbor contribution (but still be able to contrubte more if possible), but keep all investments intact. Freezing the MPPP, i.e., amending to reduce contribution to 0% of compensation as well as not allowing any more participants in, will partially get it done. I am assuming a merger of the frozen MPPP into the 401(k) would be a possible next step regarding trying to consolidate the plans. Merger would allow for the investments to stay intact as well as consolidate everything. Only drawbacks would be tracking vesting and maintaining the separate distribution options once inside the 401(k) . Any others? Alternative would be to terminate the MPPP and distribute out to participants. Termination gets rid of the vesting issue (by requiring 100% vesting) as well as the maintenance of separate distribution options within the 401(k). I would assume the PSP could be merged into the 401(k) with no problems. Any suggestions as to the big picture alternatives? Thanks.

[Blinky the 3-eyed Fish]

I see merging the MP and 401(k) plans and the easiest solution. It is what we did as soon as the PS deduction increase took effect which yielded MP plans virtually useless. Tracking a separate source should be a routine bookkeeping function. You may want to search the boards going back a ways to read up on questions people had about these mergers.

Terminating the MP plan is only going to be more expensive for the client because of all the distributions that will need to take place.

[mbozek]

Merging the MP plan will require that you retain the J & S option for those funds. termination of the MP plan will permit the funds to be rolled over to the 401k plan w/out offering the J& S annuity but will incur cost of IRS termination review. Termination requires that annuity be purchased for those ee who do not get spousal consent for lump sum. Merging permits the use of forfeitures from the MPP for benefits provided under the 401k plan.

[Lynn Campbell]

You will need a 204(h) notice when you merge/terminate the Money Purchase Plan. You can terminate it and opt out of the IRS review for termination, if the Plan is clean that may be an option and a way to save $$ and get rid of the J&S requirements.

[Blinky the 3-eyed Fish]

Lynn, how do you propose to get rid of the J&S requirements?