amending MPPP to a 401(k)

[mlp0816]

Have a potential client (not currently using our retirement services) who has MPPP and would like to amend it into a safe harbor 401(k) plan. Has a 12/31 YE with a 10% contribution to those with 1,000 hours of service. What advice can I give him to make sure he stays in compliance? If he does want to transfer the plan to us, what steps do I need to do to make sure we amend it properly?

[wmyer]

Here are some thoughts --

1) Unless plan has a last day of the year provision, can't amend until 1/1/2006.

2) Must provide 204(h) notice to participants.

3) MPPP assets must be accounted for separately, because J&S provisions will continue to apply to that money. Also, that money will not be available for hardships, and will not be available until normal retirement age for active employees. Spousal consent will continue to apply to that money.

[mlp0816]

If he amends before an employee reaches 1,000 hours, does he still need to make the MPPP contribution? His intent is to give a SH match and P/S contribution once the plan is amended?

[Bird]

If the existing plan requires 1000 hours in order to get a contribution, then you can amend until someone reaches that point, without it being a cutback.

On the safe harbor issue, I remember a specific reference in one of the notices about adding a 401(k) feature to an existing PS plan and still being able to use the safe harbor. I guess you could argue that you are restating the MP as a PS and then adding the 401(k) feature, so I think it can be done, but you might want to review that a bit.

I agree that MP assets must be tracked separately (well, if you make sure that hardships aren't allowed then maybe you don't HAVE to but you certainly should). I would keep the J&S provisions for all sources for simplicity.