Who can receive an allocation in a qualified replacement plan?

[Guest Nadyne]

A terminated DB plan sponsor has adopted a new profit sharing plan as a qualified replacement plan. Can the transferred surplus assets from the DB plan be allocated to ALL eligible participants in the new plan or is the allocation limited to only those participants who were covered under the terminated DB plan.

Any cites would be appreciated.

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Nadyne Nelson

Nadyne@iname.com

ICQ 2484855

[david rigby]

Probably best to reread IRC sec. 4980 with regard to the definition of a qualified replacement plan and the time frame for allocation. Although I do not have the text in front of me, my recollection is that you have (a maximum of) seven years to allocate, or "use up" the amount transferred from the DB plan surplus. The terms of the plan will define how much is allocated and how fast it is used up. Less than seven years is permitted, as long as you don't violate some other provision (such as 415 maximum).

Thus, the participants who benefit from this surplus are those who are participating in the DC plan at the time of the allocation(s).

BTW, notice Sec. 4980(d)(2)(i) specifies a transfer of 25% of the excess, not AT LEAST 25%.

[This message has been edited by pax (edited 01-10-2000).]