Can a Money Purchase Pension Plan be restated as profit sharing 401(k)

[Guest Kent Scrivener]

I am currently working with a 501©(3) org. that sponsors a MPPP and offers a voluntary 403(B) arrangement for its employees. Due to the fact that the assets of the MPPP are significant (relative to those held by the few participants with TDA's,i.e.,only 10% of all eligible ees are deferring), this org. would like to know if the MPPP can be restated as a profit sharing 401(k) plan going forward? It has no desire to terminate the MPPP.

I have been informed by three consultants that this restatement can be done and has been done in the past. If this is truly the case, how do I prove to/reassure the plan sponsor of the validity of this assertion? For example, where can I obtain info that would support this assertion? Any help on this matter would be greatly appreciated.

[IRC401]

In order to convert you need to "protect" all of the annuity "rights".

Why would the client want to add a 401(k)feature and need to start doing an ADP test with 90% zeros????

[Guest Kent Scrivener]

Thanks for the quick response. What is involved in protecting all the annuity rights? Also, would an ERISA atty need to be involved to draft the restated plan document and submit to the IRS as an individually designed plan? Or could this be done using a standardized prototype?

The plan sponsor is a nonprofit org that realizes that the 401(k) market is considerably more competitive from a cost standpoint (than the 403(B) market) due to the fact that there are so many more providers out there. The assets of the MPPP are significant and the assets of the 403(B) TDA's (on an aggregate basis) are very insignificant. There is only one HCE at this time and the plan sponsor is actually considering the 401(k) safeharbor approach utilizing a match as well as a profit sharing contribution.

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[MWeddell]

For authority supporting the assertion that a money purchase pension plan may be restated as a profit sharing plan, see Revenue Ruling 94-76 and Q&A 40 from the March 1997 Enrolled Actuaries meeting gray book.