Keogh to MEP

[Guest FJMISS]

I have a client that would like to merge their existing Keogh (HR10) assets into our MEP. Their Keogh is set up as a QRP and is a DC Plan. I've consulted with my counterparts and they indicated a merger of this type is not allowed in our plan but cannot provide proof within the code as to why. I reviewed Rev. Rul. 2004-12 but it specifically addresses Rollovers and not mergers. I've also reviewed Treasury Regulations, Subchapter A, Sec. 1.414(l)-1 but can't locate anything concrete to prove to the client why we cannot allow this type of merger.

The only piece of information I may be able to rely on is Rev. Rul. 94-76 and Rev. Rul. 2002-42, 2002-2 C.B. 76. "§ 414(l) transfer between dissimilar § 401(a) plans (or a plan amendment treated as such a transfer), the characteristics of the transferor plan continue to apply to the transferred assets held in the transferee plan"... although it doesn't specifically addresses merging a Keogh to a MEP we may be able to rely on this argument because we cannot guarantee the characteristics of the transferror plan will continue due to the fact that we are limited to the plan design of the MEP and cannot make amendments for individual Adopting Employers.

Any thoughts or suggestions are appreciated.

[J Simmons]

You indicate that the Keogh is a DC QRP. What kind? PSP? MPPP? Target Benefit?

How about the MEP? Is it it a DC QRP? If so, what kind?

It is this typing of plans that imbue benefits with different types of characteristics.

I think that is what is meant by the type of plan rather than one being a MEP and another being a Keogh--both of those characteristics go to the type and number of employers, not the type of plan.

[Guest FJMISS]

You indicate that the Keogh is a DC QRP. What kind? PSP? MPPP? Target Benefit?

How about the MEP? Is it it a DC QRP? If so, what kind?

It is this typing of plans that imbue benefits with different types of characteristics.

I think that is what is meant by the type of plan rather than one being a MEP and another being a Keogh--both of those characteristics go to the type and number of employers, not the type of plan.

I apologize, the MEP is a 401(k) PSP and the Keogh is a PSP. Unfortunately, I do not have the exact number of employees.

[J Simmons]

I would think then that the MEP (a 401k PSP) is of the same type as the Keogh (PSP) for purposes of preserving characteristics attendant to the Keogh benefits, but a closer look at the features would be needed. For example, perhaps the Keogh plan allows in-service withdrawals or are subject to the QJSA/QPSA rules, due to plan design. Language might be in the MEP to preserve features of benefits merged into the MEP that the MEP does not itself imbue on benefits accrued under the MEP. And then there is the question of whether the documents of the two plans have, or can be amended, to allow a merger. However, off the cuff, I would guess it is doable, if done right.