Amending MPPP to 401(k)

[Guest CAM]

Can a Money Purchase Pension Plan be amended to 401(k)? Non-profit organization currently has MPPP to which employer makes contributions and a 403(B) to which employees make contributions. They would prefer the less restrictive investment options under the 401(k). Instead of terminating the MPPP can it be amended to a 401(k) to avoid full vesting? There are currently 34 participants in the MPPP only 2 are fully vested. It has a 5 year graded schedule and most of the employees have been there 2 or less years. The 401(k) plan would provide either a fixed match or a fixed profit sharing contribution equal to the same % currently going to the MPPP. Since COLAs are not permitted in a MPPP, I have serious doubts that it can be done but I'm looking for a yes answer. Thanks.

[MWeddell]

Yes, the money purchase pension plan may be amended to become a 401(k) plan (technically known as a profit-sharing plan with a qualified cash or deferred arrangement).

Question #40 from the 1997 Enrolled Actuaries Meeting gray book addresses this squarely. Rev. Ruling 94-76 is also relevant: the annuity forms of payment on the money purchase assets must be preserved and in-service withdrawal options may not be added for that money. I'd guess there are also private letter rulings supporting this position, but I don't readily know of them.

[Guest CAM]

Thank you!!! You made my day!