414k Election/Status/New Ideas

[Guest John Comelately]

I have a DB plan, with a favorable determination letter, that includes a 414k provision.

One employee has reached normal retirement age of 62 and wants to "transfer" his accrued benefit to the 414k account in the plan. The employee intends to continue working for the corporation. For various legal reasons he does not want to roll over his accrued benefit to an IRA.

I am aware that the IRS has granted many favorable determination letters for 414k plan provisions, but other wise has concluded a 414k account is not "compatible" with a DB plan. Also, there is a specific question on Form 5500, concerning a plan with a 414k feature.

Questions about 414k

1. Is anyone aware of any new information on the current IRS position on 414k (e.g., court cases, rulings, announcements, etc.)?

2. Does the new pension law in any way authorize or support the use of 414k?

3. Does anyone have a personal audit experience with 414k?

4. If the employee's accrued benefit is transferred to the 414k account, what is the economic risk upon audit? That is, what might be the IRS proposed method of correction on audit (Ignore the transfer, Distribute the balance to the participant, Disqualify the plan, Etc.)?

5. Is the use of a 414k provision a plan disqualification issue?