TEFRA 242(b) Election

[12AX7]

Participant was a 5% owner and there were no other participants in that plan. 5% owner's company is purchased and the (old) plan continues to exist for more than 30 years. 5% owner provides services for the parent company.

Old plan has a TEFRA 242(b) election in place for the 5% owner. Is the election still valid with the "5% owner" as long as he is an employee of the parent company, or should the election have become invalid when he went to work for the parent company.

Thanks.

[ETA Consulting LLC]

It should remain in place provided it is for the same plan; barring some language in the election stating otherwise.

Good Luck!

[12AX7]

ETK, are you saying the regs in 401(a)(9)-8 are disregarded for determining if the RMD requirements for each plan have been met? I don't necessarily feel comfortable with the current non-RMD status, unless the rules of the 242 (b) election are preserved since the "5% owner" is working for a related entity.

[ETA Consulting LLC]

ETK, are you saying the regs in 401(a)(9)-8 are disregarded for determining if the RMD requirements for each plan have been met? I don't necessarily feel comfortable with the current non-RMD status, unless the rules of the 242 (b) election are preserved since the "5% owner" is working for a related entity.

No. I'm not saying that; as I am confused on the fact pattern. I am under the impression that the plan was taken over by the new employer. The TEFRA election should state the plan it applies to; and should remain in effect since the plan is in existence.

Now, if the employer sponsors another plan (and has two plans), then the election should not apply to the new plan.

Sorry for the confusion.

Good Luck