Do we have to keep track of MP and PS assets separately when MP merges into PS? Even if PS plan specs are identical to MP plan specs?

[Guest DIGMYDOG]

I have a PS plan that has MP assets in it since 2002 (an EGTRRA merge). We have been keeping track of all the assets separately, but recently the financial advisor made some transfers between the PS and MP assets, so now the MP assets accounts have some PS money in it. It is becomming a night mare trying to keep track of what is PS and what is MP with every buy and sell and dividend distribution. The assets are in a Schwab brokerge account.

If both plans were set up exactly the same: no hardship distributions, no in service distributions, annuity form of payment, same eligibility requirements, same vesting, etc. Why do we have to continue to keep assets separately?

Could we amend the plan to state the fact that the PS plan has retained all the requirements of the MP plan so therefore the assets will not be kept separately.

We could then have the financial advisor transfer all the MP assets into the PS account, and do away with the MP accounts.

Is there any guidance on this? Can anyone help me with this?

Thanks!

[DP]

All of our clients keep their Merged MPP money in the same brokerage account as their PS money. As TPA, we do the recordkeeping on how much is in the Merged MPP versus the PS. Earnings are allocated to each bucket of money on a prorata basis.

[Blinky the 3-eyed Fish]

Dig, are you stating that the plans were set up with the same provisions? If that is the case and there are indeed no in-service distributions on the PS dollars, then there is no reason to track separate MP and PS sources. Combine away.

[chris]

Blinky's right. The whole purpose of separately tracking them is to prevent MPPP monies from coming out under PSP distribution options, hence, Rev Rul 94-76 with approved language re the same. If all dist. options were originally available to all funds, then there's nothing to prevent by keeping them separate.

[Bird]

Like DP, we generally let the clients use a single brokerage account and we maintain separate sources on our system with pro-rata allocations.

But, I agree you don't have to if the provisions were the same and you keep annuity options for the PS plan. (But, sooner or later, the client's going to want to add hardships or something that can only be done with PS money - that's why we try to keep 'em separate, even if "it doesn't matter.")

[stephen]

I agree with Bird. Currently "it does not matter" but who's to say it may not matter in the future. If you don't maintain the separate tracking it will be extremely difficult to separate the money types later.

[Belgarath]

Maybe I'm misundrstanding the situation that you have. I'd say that when you have a MP merged into a PS, that although you can merge the assets into one account, you must TRACK them separately. The prior MP assets are subject to QJSA requirements. How would you justify ignoring this requirement?

[Blinky the 3-eyed Fish]

Nobody is suggesting that would be ignored. The PS dollars would be subject to the same J&S requirements.

[jquazza]

You can amend the PS to eliminate the J&S requirement, but they would still apply to the MP money, hence, you have to keep track of them separately.

[Blinky the 3-eyed Fish]

That's why if you wanted to NOT track them separately, you couldn't remove the J&S provisions. Just like you couldn't add in-service distributions.

[Effen]

FWIW, I think as long as the MP distribution requirements (QJSA) apply to ALL PS money, you should be ok. I have had attorneys tell me that if you co-mingle assets, the QJSA rules must apply to all participants, even those who never had a MP balance.

[rcline46]

But when I takeover the PS plan, and see the J & S requirements and no separate MPPP accounts and remove the J & S then the law has been circumvented.

I think you have to keep track even though they may have the same benefit options.

[Effen]

But you CANT remove the J&S requirements from that Plan. That would be a 411(d)(6) violation.

[Blinky the 3-eyed Fish]

That would be an argument for keeping track of the sources, not a requirement. The law wouldn't have been circumvented in your example, rather the plan would be operated incorrectly because the J&S couldn't be removed rightfully. There is still no requirement to keep track of the sources.

[E as in ERISA]

Bottom line: If you don't keep track of sources, then you have to apply the most conservative rules to the money. If you want more options now -- or in the future! -- you need to keep track.