Successor Plan Rules

[Below Ground]

Company X has sponsored a stand alone 401(k) Plan for several years. Now, Company X wishes to "do away" with its stand alone plan and adopt a multiple employer plan.

If Company X adopts the Multiple Employer Plan, do the account balances of the existing stand alone plan need to be transferred into the Multiple Employer Plan? Or, could that existing stand alone plan be terminated with balance paid out to members?

I believe that under "successor plan rules", balance need to be transferred to the Multiple Employer Plan, but am foggy on that specific topic. Any help would be greatly appreciated.

[QDROphile]

Since you asked for "any help," I suggest that Company X should make an informed decision about whether or not it wishes to risk violation of securities laws by participating in a multiple employer 401(k) plan. Several other threads discuss this issue.

[Below Ground]

Thanks for the "heads up". Any input toward the original question?

[Locust]

You need to look at the successor plan rules under Code ss 401(k)(10). Generally, you can't pay out elective contributions from a terminated 401(k) plan if you have another defined contribution plan (in place or established within 12 months) - a successor plan. If the multiple employer plan is a successor plan for the company (it seems likely to me), the elective contributions could not be paid out on plan termination. This is a tricky fact specific issue and you should review closely with an expert.