What is best way to merge an existing money purchase plan into an exis

[John A]

Is there any reason to consider terminating the money purchase plan rather than merging the 2 plans? If so, could the plan require direct transfer or direct rollover into the 401(k) plan as the only option? Would there be any problem with giving participants the option of a rollover into the 401(k) plan?

If merging the plans is the better option, what are the issues involved? The only ones I could think of were issuing the 204(h), d sticking the 401(k) plan with J&S requirements, and filing a final 5500 for the money purchase. Are there other issues?

Thanks!

[MoJo]

I think you've hit on the only issues, except for continuing liability issues (is the MPPP clean? any history there that would taint the k plans)? I generally recommend merging the plans - it was established as retirement plan - terminating with elective rollovers invariably means assets get spent.... Call me paternalistic, but....

If you force the assets to the k plan, its a merger, regardless of what you call it....

[davef]

A few other things to keep in mind when merging a MP plan into a 401(k) plan:

1. Depending on when the merger occurs and the terms of the MP document, would there still be a contribution due under the MP plan?

2. If there are outstanding loans under the MP plan, you may need to re-do the loan documents to show the 401(k) plan as the payee.

3. Although you alluded to keeping the J&S requirements, you would still need to preserve all other 411(d)(6) protected benefits, if any.

[Dave Baker]

Unless you keep some kind of separate accounting, you'll need to have the joint-and-survivor annuity rules apply to the existing 401(k) balances.

That might make some participants mad, when it comes time to make an in-service withdrawal (e.g., hardship) or at termination of employment - a participant who is married at that time will need to get his or her spouse's permission to take the 401(k) funds out in a non-annuity form of payment (even the 401(k) funds accumulated before the money purchase plan assets were merged in). Becomes especially unpleasant if one or more of your married participants already is separated but not legally divorced.

[Guest Off_the_record]

I think, although I may be incorrect, that in addition, under the merged 401(k) plan, you must guard against in-service distributions from the portion of the participants account which originated from the money purchase plan. I believe such in-service distributions are prohibited.