401(k) as Qualified Replacement Plan

[Doghouse]

Plan sponsor wants to terminate overfunded DB plan, transfer excess assets to existing 401(k) profit sharing plan that qualifies as a "qualified replacement plan", thus exempting the sponsor from the 4980 excise tax.

There has been recent guidance indicating that 401(k) "safe harbor" contributions cannot be funded by forfeitures, since the contributions leading to the forfeiture account weren't fully vested at the time they were made.

I haven't heard much discussion as to whether this same restriction would apply to excess assets transferred from a terminated defined benefit plan. I can see an argument both ways, and have found no official guidance at all.

Any unofficial guidance would be appreciated!

Dog

[Kevin C]

http://www.irs.gov/pub/irs-wd/1147032.pdf

In request 3, they cite the rules prohibiting pre-funding of the match and say the excess assets can not be used towards a SH match or even a regular match. It also mentions that this rule does not apply to forfeitures.

Does your plan use the 3% SH or the match? The prefunding restriction they cite only applies to the match.