Amend Money Purchase to PS/401(k)

[PMC]

MPP with plan year of 11-1 to 10-31. No restrictions (LD or hours) on receiving the employer contribution (5% of comp.). Employer wants to amend to PS/401(k) effective 5-1-07.

1. Can the employer amend effective 5-1-07 and fund the plan based on compensation earned up to 5-1-07 (204(h) notices, etc. to be done)? Or

2. Does the employer have to continue to fund through the end of the plan year (10-31-07) based on compensation through that date (204(h) notices etc.)?

Have received a couple of different opinions that #1 is acceptable based on 1.412(b)4© which basically states no contribution due after the date of plan termination. But those supporting #2 state that if there are no restrictions on receiving the contribution, once a participant accrues a right the full contribution is due for the entire plan year.

Now I suppose you could amend the plan year to end 4-30-07 which would make this all moot but absent the plan year change any thoughts?

[JanetM]

Give notice that future accruals to MP plan will be 0%. Start new plan for P-401K. If you want you could merge the plans later. Be aware that the J&S provisions will stick to MP balance even after they are merged to PS.

[John Feldt ERPA CPC QPA]

As a side note, if not all of the participants in the MPP are 100% vested, and you don't want to vest them 100% when you merge, then be sure that the surviving plan retains a vesting schedule applicable to the accounts coming over from the MPP when they are merged in (or make the vesting faster if you want).