Multiple Employer plan termination - one group spins off

[Guest Jennyb473]

I have a Multiple Employer Plan that terminated as of 6/30/09. One of the groups has decided to spin off on their own and maintain their 401k plan with another provider, etc. I found out today that the new plan is effective 8/1/09 - is that an issue? I thought it would have to be effective 7/1/09 since it is a spinoff and the old plan terminated 6/30.

thanks!

[J Simmons]

I have a Multiple Employer Plan that terminated as of 6/30/09. One of the groups has decided to spin off on their own and maintain their 401k plan with another provider, etc. I found out today that the new plan is effective 8/1/09 - is that an issue? I thought it would have to be effective 7/1/09 since it is a spinoff and the old plan terminated 6/30.

thanks!

Did the MEP (multiple employer plan) sport a 401k feature? If so, the constituent ER having its own 401k plan so soon (one month later) would make the termination of the MEP not a distributable event for EEs of that constituent ER.

For "spin off" purposes, the plan being established effective 8/1/2009 may receive a trustee-to-trustee transfer of the assets/liabilities of the benefits of the EEs of the MEP-constituent ER that is establishing and sponsoring the new, 8/1/2009 plan.

[Guest Jennyb473]

yes, the MEP did have a 401k feature and we are not distributing assets to that group - we are doing trustee to trustee transfer. My bigger concern really is the month in between. Since the old plan had 401k feature people have deductions coming out - where do those go for the month of July? They can't go into the old plan that terminated 6/30 and can't go into the new plan that doesn't start until 8/1 - so do they just not have deductions for that month?

[J Simmons]

yes, the MEP did have a 401k feature and we are not distributing assets to that group - we are doing trustee to trustee transfer. My bigger concern really is the month in between. Since the old plan had 401k feature people have deductions coming out - where do those go for the month of July? They can't go into the old plan that terminated 6/30 and can't go into the new plan that doesn't start until 8/1 - so do they just not have deductions for that month?

No plan, no deferrals for July unless you postpone the MEP withdrawal to 7-31.

Also, you'll need new elections for new plan beginning 8-1.

[Guest Jennyb473]

that is what I thought - thanks.

But you say if they postpone w/d until 7/31 - do you mean w/d or plan termination? I thought since plan officially terminated 6/30 that was it even though it will take a little bit of time to move money. We do have it scheduled to transfer assets 7/31 providing all safe harbor contributions from old plan are funded by then. Does that mean I can still accept the July deferrals into the old plan?

[J Simmons]

that is what I thought - thanks.

But you say if they postpone w/d until 7/31 - do you mean w/d or plan termination? I thought since plan officially terminated 6/30 that was it even though it will take a little bit of time to move money. We do have it scheduled to transfer assets 7/31 providing all safe harbor contributions from old plan are funded by then. Does that mean I can still accept the July deferrals into the old plan?

Plan termination. Too bad the MEP did terminate on 6/30, however if the sponsoring employer acts, then it could postpone that to 7/31. You can only accept the July deferrals into the old plan if the sponsoring employer of the MEP postpones the date of termination of the MEP to 7/31.

[Guest Jennyb473]

great - that is what I thought. MEP will not hold off on termination for this one group - they are the bad seed as is. So I'll just tell them we cannot accept the July deferrals and to contact their new provider to find out what/if they can go into the new plan and leave it at that.

thanks so much for your input!!