Plan Transfer

[Randy Watson]

A 401(k) plan contains a transfer of money purchase accounts that came over through a plan merger a few years back. The money purchase dollars are tagged with a required QJSA distribution form. Is there anyway to "terminate" the money purchase accounts so that there is no longer a QJSA requirement? We'd like to treat those accounts as true rollover accounts. Any ideas other than transfering them to a new MPP and then terminating that plan?

[J Simmons]

A 401(k) plan contains a transfer of money purchase accounts that came over through a plan merger a few years back. The money purchase dollars are tagged with a required QJSA distribution form. Is there anyway to "terminate" the money purchase accounts so that there is no longer a QJSA requirement? We'd like to treat those accounts as true rollover accounts. Any ideas other than transfering them to a new MPP and then terminating that plan?

I think you've already identified the only solution. I'm wondering though, is the QJSA distribution process so burdensome as to prompt this or is there another objective?

[Randy Watson]

A 401(k) plan contains a transfer of money purchase accounts that came over through a plan merger a few years back. The money purchase dollars are tagged with a required QJSA distribution form. Is there anyway to "terminate" the money purchase accounts so that there is no longer a QJSA requirement? We'd like to treat those accounts as true rollover accounts. Any ideas other than transfering them to a new MPP and then terminating that plan?

I think you've already identified the only solution. I'm wondering though, is the QJSA distribution process so burdensome as to prompt this or is there another objective?

Eliminating QJSA and allowing for in-service distributions (of "rollovers") are the primary objectives. In your opinion, how do you think the IRS would react to this transfer to a new plan and subsequent plan termination? It seems pretty shady to me.

[J Simmons]

I don't see why the IRS should get all worked up about it, unless you wanted to start a new money purchase pension plan right away. The QJSA rights would all have to be dealt with, but those rights preserved in the process. An employee and spouse would either waive QJSA and allow rollovers, or the benefits used to purchase QJSAs.

All employees would be 100% vested by reason of the termination, if they were not already.

The only thing you are actually accomplishing is a distribution triggering event now, while those employees are yet in service. However, by having merged those MPP benefits into the PSP in the first place, you postponed the eventual payout that would have taken place had you terminated that MPPP rather than merge it at that time.

I however have no direct knowledge of the IRS' response to spinning off the MPP benefits into a new plan and then terminating it.

[movedon]

What about permanency and the general requirement that contributions be made as a condition of qualification?

[J Simmons]

As a spin off, the history from the time part of the 401k plan (and the MPPP's separate existence before the old merger) ought to supply the permanency and contributions requirements.

[Randy Watson]

As a spin off, the history from the time part of the 401k plan (and the MPPP's separate existence before the old merger) ought to supply the permanency and contributions requirements.

What would be the basis for spinning benefits out of one plan to another? Do we need a reason?