401(h) Accounts

[Ron Snyder]

1. Profit sharing and/or 401(k) funds are rolled over into a DB or MP pension plan that includes a 401(h) feature. This apparently is not a Section 420 transfer of funds. Under these circumstances is a share of such funds allowed to become 401(h) account funds? Is it required?

2. Funds from a DB or MP plan are directly transferred into a profit sharing plan through merger. Are such funds still considered to be "pension" funds making them eligible to be transferred into a 401(h) account?

Not much guidance out there on these issues.

[Guest mjb]

I thought there is an IRS policy that prohibits distributions from qual plans to be transferred tax free to health ins/benefit type programs because it would result in tax avoidance since the health benefits would not be taxed. There is a PLR which prohibits the tax free transfer of a distribution from a PS plan to health ins account under the same plan on the grounds that the PS account was tax deferred and must be subject to taxation. Dont know anything about #2.