MEP 401(k) Termination and EGGTRRA Restatements

[Guest Win]

With 4 companies listed under a 401(k) MEP doc, if the sponsoring company (company A) wants to terminate the plan and the 3 other participating companies (companies BCD) want to install new 401(k)s to continue benefit,

1) What is the proper procedure for terminating from the MEP so that BCD can adopt a new plan? Remove by resolution/amendment from the MEP first, then adopt new plan? Or can the sponsor (A) terminate the MEP which defaults to BCD's removal from MEP and they start their own respective plans with no wait period?

2) If it is necessary to remove BCD from MEP first prior to MEP termination as the best course of action, is it necessary to restate the MEP at this time to adopt new language for BCD removal?

3) Similarly, when terminating the MEP, is it necessary to restate the MEP at this time to adopt new language?

[J Simmons]

What about A turning over sponsorship of the MEP to B, C or D, and then A withdrawing? Also, restate for EGTRRA to update documents.

This way, you won't run afoul of B, C and D having to sit out for 12 months having a 401k following distribution of the benefits to their employees from an otherwise terminating MEP 401k.

[Guest Win]

That's a terrific point, but BCD desire to move forward with their own plan doc. The question of having to sit out 12 mos is part of what prompted question on how to properly remove BCD. Thanks.

[J Simmons]

If BCD are concerned about the operational or document histories of the MEP 401k, then starting a new plan would give them a clean slate to begin with. However, for the old MEP 401k to terminate, it must distribute out all the benefits. That means that BCD's EEs will have to be without a 401k plan for at least 12 months.

In my view, BCD probably should be concered about those histories if the current MEP 401k was being operated by A, the plan sponsor, and BCD might not know the compliance level. But if BCD are NOT concerned about the operation or document histories of the MEP 401k, then they'll have their own plan DOCUMENT after the EGTRRA restatement, and they choose the features and design BCD want.

[Guest Win]

Thank you very much Mr. Simmons.

[Guest Sieve]

MISTER Simmons, ehh?? Such respect . . .

Since this is a multiple employer plan, the various non-discrimination tests were performed on an employer-by-employer basis. So, operational issues and difficulties should be something that B, C and D have a reasonable handle on. Even if they are uncomfortable with administrative & operational issues because of their negligible involvement, they could stay with the same TPA after establishing their new plans and therefore be able to look to that TPA for historical back-up documentation and necessary fixes should something pop up. So, I would favor a spin-off from this plan to new plans for B, C and D, and then A can be left to terminate what's left.

[Guest Win]

That seems to be the conscensus conclusion. Thank you Mr. S. (you deserve the same appreciative respect.)