Spousal consent, cash-out limit, DC plan sources

[John A]

How do the spousal consent rules apply in the following situation: married participant has $4,000 vested balance in a money purchase plan, $4,000 profit sharing balance plus $4,000 deferral balance in a 401(k)/profit sharing plan that is subject to J&S rules?

[david rigby]

Assuming the plans have been amended to increase the involuntary cash-out limit from $3500 to $5000, the limit applies to each plan. Don't know of any requirement to add the amounts from multiple plans together.

[This message has been edited by pax (edited 10-10-1999).]

[John A]

pax, just to clarify: assuming the $5,000 limit, are you saying that 1) no spousal consent is required for the money purchase plan distribution since the amount is less than the $5,000 cash-out limit, and 2) spousal consent is required in the 401(k) profit sharing plan since the $8,000 total distribution is above the cash-out limit (that is, the total plan distribution amount is considered; it does not matter that some of the money is from employee contributions and some from employer contributions)? Thanks!

[david rigby]

Yep.

[John A]

Thx, pax!

[KJohnson]

Pax--Is there some reason you thought you needed a Plan amendment or can you simply institute the $5,000 provision as long as you adopt an amendment within the remedial amendment period?

[david rigby]

OK, I think that is correct; you do have until the remedial amendment period. However, my preference is to document the intended amendment. Perhaps that can be a memo to file stating the administrative practice that will then be placed in a formal amendment.

[Dave Baker]

But if the plan is terminating, I think one probably needs to have the paperwork amended to add the $5,000 cash-out rule before all the funds leave the trust.