How correct when MPP assets merged into PSP instead of distributed?

[Guest Pennysaver]

Issue: A money purchase plan is terminated. Subsequently its assets are merged into a profit sharing plan. Participants in the money purchase plan are not provided the option to take distribution rather than have their accounts merged into the profit sharing plan.

Question: Would this be a failure under EPCRS? If so, how would it be corrected?

[david rigby]

Can't be both a merger and a termination.

Your ERISA attorney will help determine which is correct.

[Guest Pennysaver]

Can't be both a merger and a termination.

Hmmmm. But a terminated defined contribution plan can transfer the assets of non-consenting participants with vested interests exceeding the cash-out limit to another defined contribution plan maintained by the same plan sponsor, so long as that plan protects the optional forms of benefit applicable to the transferred assets. If the word "merged" is confusing the issue, then please substitute the word "transferred". The issue - and the question - are still the same, however.

[QDROphile]

If it is a transfer of all the assets without participant election, it is a merger.

[david rigby]

Subsequently ...

This word might cause one to question the exact nature of the transaction.

Perhaps a close inspection of the board resolution or other document(s) that caused this transaction?

[Guest Pennysaver]

If it is a transfer of all the assets without participant election, it is a merger.

But that's the problem. The plan was terminated. Then, instead of making distributions, the terminated plan's assets were merged/transferred without participant election. Is this a failure with respect to the notice and consent requirements? Is this a failure with respect to timely distribution of a terminated plan? Is this some other failure? Or not a failure at all?

[QDROphile]

Same answer: "Your ERISA attorney will help determine which is correct."

[Guest Pennysaver]

Same answer: "Your ERISA attorney will help determine which is correct."

While I certainly appreciate the wisdom of that response, QDROphile, if it is possible to at least get some pointers in the right direction from someone on this forum, perhaps to a Revenue Ruling or some other IRS guidance that a layperson might be able to access, that would be very helpful.

Thanks!

[QDROphile]

It was not a flippant response. Curt, maybe. Depending on the facts, circumstances and documents, pretty much any of the outcomes you identified are possible. It would be impossible for enough information to be given on the board for an informed comment about which possibility seems to be most likely. You need an experienced adviser to evaluate and make the most of the facts, whatever they are. You got one refinement. It is very likely that some merger scenario is involved. But we can't say, so we don't.

[Bird]

I think the responders missed the point - Pennysaver has correctly identified that the subsequent "merger" activity is incorrect and is asking how to fix it, not whether it was really a termination or a merger.

Generally, corrections are geared towards putting things back to where they should have been, so I'd guess that you're looking at allowing distributions from the PS now. That would probably violate the terms of the plan, so yes, an ERISA attorney's input should be sought. If the physical transfer of assets was recent, I'd consider simply shuffling them back to the old plan and then completing the termination as it should have been done.