Guest Susan Keys Posted March 20, 2000 Posted March 20, 2000 Corporation sponsors a vanilla profit sharing plan which was adopted a number of years ago by an affiliated corporation ("Affiliate"). The Affiliate has more than 20% of the total participants in the plan. The Corporation and Affiliate want to go their separate ways, with the Corporation adding 401(k) terms to its plan and the Affiliate sponsoring its own profit sharing plan. If the accounts are transferred to Affiliate's new plan via a trustee-to-trustee transfer in a spinoff, would they have to be fully vested or would they following the vesting schedule (identical to Corporation's schedule) of the Affiliate's new plan? Will the withdrawal of Affiliate's participants cause a partial termination to Corporation's plan, requiring 100% vesting of the Affiliate's particpiants' accounts? FYI, the two companies used to form a controlled group, but Affiliate was recently sold to an unrelated party.
Guest Dook Posted March 28, 2000 Posted March 28, 2000 In my opinion there is no call to 100% vest these participants' accounts. The fact tht the Affiliate is taking over and contibuing that portion of the plan means that they are protecting all of the rights and benefits of the original plan. Assuming that they apply the same (or better) vesting schedule to the funds and count all years of service earned prior to the spinoff they are o.k. Partial termination determinations come about in situations where the participants have no opportunity to continue participation in the plan following the event.
Kirk Maldonado Posted March 28, 2000 Posted March 28, 2000 Full vesting is not required upon the merger of two defined contribution plans, provided the requirements of IRC Section 414(l) are satisfied. Q&A-16 & 18, IRS Technical Information Release 1408, October 30, 1975. Kirk Maldonado
John A Posted November 9, 2000 Posted November 9, 2000 Kirk, do you know where I could get a copy of IRS Technical Information Release 1408? Also, do you know if any of the recent changes to the same desk rule would change the answer in a situation where the plan merger is in conjuction with a corporate merger and the same desk rule applies?
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