HELP! Transfer of Assets

[Guest Phil L]

We administer two retirement plans for a company. One plan is for union employees and the other is for non-union employees. Two union employees became non-union employees in 1998. The employer would very much like to transfer their account balances to the non-union plan where they now participate. Would a board resolution authorizing the transfer of assets and liabilities for these two people be sufficient? Also, would this transfer of assets and liabilities necessitate the filing of a 5310-A Form for each plan? The penalty for not filing this form is $25 per day so I need to be sure about this one.

Thanks for your help.

[LCARUSI]

I think you need:

1) a resolution authorizing the transfer

2) language in both plans providing for transfers when an employee changes status (union/nonunion)

3) 5310-A (I don't see you as falling into any of the exceptions for filing the form.)

You need 1 and 3 for each transfer.

Why not leave the participants' balances in the union plans? In the future, as participants switch bewteen plans,you let them maintain balances in both plans - probably easier than always doing these transfers.

[Alonzo]

Unless the plans are substantially the same with respect to distribution options, be careful transferring accounts from one plan to another. You could end up with 411(d)(6) nightmares, if, for example, the union plan has annuities, or some kind of installment option, and the salaried plan just pays lump sums.

[MWeddell]

The instructions to Form 5310-A are fairly clear about when the form doesn't have to be filed as long as you read through the end of them about the fact that a transfer of two employees' accounts is treated like a spinoff from the union plan and then a merger of those two employees' account balances into the nonunion plan. Unless there's an unallocated suspense account (such as forfeitures, employer contributions paid early in the plan year before they're allocated, leveraged ESOP, 415 suspense accounts), then you won't need to file a pair of 5310-A's before each transfer.

I agree that the plan documents for both plans will need to be amended but I don't see why a corporate resolution can't approve the amendments and any transfers that thereafter results from the amendments.

Some reasons for wanting to effect the transfer: (1) the nonunion plan was better investment options or more generous loan options, (2) loan repayments come through on separate payrolls so you'd like any loans being repaid by current nonunion employees to be paid into the nonunion plan, (3) the recordkeeper has one master file for both plans and separates records only when preparing Form 5500 and discrimination testing, in which case the recordkeeper often can't maintain two accounts for the same employee.