Terminate Money Purchase and Start up 401k?

[Dennis Povloski]

Having brain freeze this morning.....

Are you allowed to terminate a money purchase plan and then immediately start up a 401k? Or is that one of those situations where you have to wait a year after terminating the money purchase before you can set up the 401k?

[Guest Sieve]

No wait needed between MPPP termiantion and establishment of 401(k).

[Dennis Povloski]

Does the one year wait only apply when you terminate a 401k plan and want to set up another DC plan?

[Guest Sieve]

Yes. Without a sufficient waiting period before establishment of another DC plan, a 401(k) plan termination is not a distributable event with regard to any distribution from the 401(k). No waiting period is required by law, however, if distributions from a terminated 401(k) plan result only from other distributable events (e.g., employment termination).

[Dennis Povloski]

That's where it comes from. Thanks for all your help!

[SheilaD]

Having brain freeze this morning.....

Are you allowed to terminate a money purchase plan and then immediately start up a 401k? Or is that one of those situations where you have to wait a year after terminating the money purchase before you can set up the 401k?

You might consider restating the Money Purchase as a 401(k) to save on expenses.

[12AX7]

You could do that, but then have no distributable event for the MPP accounts. It depends on the client's objectives.