Going from co. to co. in a controlled group

[AlbanyConsultant]

If a participant leaves company A and begins to work for company B (both of which are in the same controlled group), can their account balance be transferred from A's plan to B's plan? Or is there not a distributable event because the participant hasn't left the employ of the controlled group? Does it matter if the change was initated by the company or the participant?

Gut reaction: you would be allowed to make the transfer; it would certainly make things like loan processing easier.

Thoughts?

[QDROphile]

Mind the dfference between rollover and transfer and your gut reaction is correct. Then mind the need for the appropriate infrastructure.

[Locust]

You could do a plan-to-plan transfer, but couldn't distribute from the plan because there is no severance of employment.

Members of a controlled group are considered a single employer. When an employee moves from coverage under one plan of the employer to another plan, there's no event that would allow payment. It would be similar to the situation where a company had hourly and salaried plans, and an employee changed from hourly to salaried status - the employee would be covered by a different plan but his employment with the employer hasn't changed. Vesting continues under the old plan, and only when he terminates employment with all members of the controlled group (the single employer) could he be paid from the old plan.

If you've got loans, let's hope your loan agreement will take care of transferring the pay reduction agreement to the new company - if not, you'll need to work something out to get a new pay reduction agreement; the option would be a default.