Contributions to money purchase and profit sharing plans

[Guest Theresa]

I think I already know the answer to this question, but anyway, can employer contribution money that has been put in to a profit sharing plan be transferred to a money purchase plan in order to meet the funding formula?

They are trying to get away from having to put more money into the money purchase plan by taking some money that was put into the profit sharing plan and moving it to the money purchase plan.

[This message has been edited by Theresa (edited 11-24-1999).]

[Guest ptpnthr]

To give a short, incomplete answer, no. What are you thinking of transferring, forfeitures?

[david rigby]

And why? What are you trying to accomplish?

[Earl]

If you start to treat the trusts as one pool for both plans, you have no problem.

[Guest Ray Williams]

This issue was extensively cussed and discussed at ASPA during the IRS Q & A (see question 27). The IRS postion is that once money is deposited to a plan's account it belongs to that plan.

The proper proceedure would be to establish a holding account owned by the Employer where any potential PS and/or MP deposits would be made during the year. At the end of the year, when the final allocation is made, the funds would then be transfered to the proper Plan account.

[Guest crosseyedtester]

This seems to be about the closest thread to my question that I can find....

A Money Purchase Plan was frozen in 1995. For some reason, there was a Holding account with unallocated money. There was also an unallocated Forfeiture Account. Forfeitures were to be used to reduce future employer contribution deposits.

The MP Plan has since been merged into the PS plan. The owner is the only remaining Participant.

How should that unallocated money be treated when there are no more contributions according to the MP plan?

Thanks.

[mbozek]

What does the PS plan say should be done with forfeitures since they are assets of the PS plan?

[Guest crosseyedtester]

Can I take from your question that though the money originated in the MP plan, now that they are merged, the employer holding account and the forfeiture can be treated in the same manner as if they originated in the PS plan?

[jquazza]

I think you have a problem and you should look at the plan provisions pre-merger. By the way, did you file for a determination on the merger? Since you had unallocated money, I believe it was required. My guess is you didn't file otherwise the IRS would have told you to use the forfeitures prior to merging the assets.

[mbozek]

The merger eliminates the provisions of the MP plan other than the J & S annuity requirement for the amounts accrued under the MP plan and continuation of the MP vesting schedule. See Rev Rul 2002-42. There is no requirement that the surplus be restricted to participants in the MP plan. The surplus becomes an asset of the PS plan and can be allocated in accordance with the PS plan provisions.

[jquazza]

Mbozek,

don't you think there is room for abuses if you don't alllocate the forfeitures until all participants but the owner are gone?