withdrawl from multiple er plan and transfer of assets

[Draper55]

if a participating employer withdraws from a multiple employer 401(k) plan

and transfers the assets to another 401(k) plan that it sponsors, would this violate

the 12 month alternative defined contribution plan rule or could it be argued that

the employer did not terminate the multiple employer plan but only its participation in the

multiple employer plan?

[00hskrgrl]

LOTS of experience with MEP's. It's not a termination of the plan, just a withdrawal from participation in the plan.

Make sure you understand the provisions of the MEP, especially with respect to vesting, spousal consent, distribution timing, etc., because those may need to be preserved for the tranfserring balances in the 401(k) plan, even long after the spin-off/merger occurs. For example, the MEP likely credits service with other participating employers towards eligiblity and vesting - if someone has a higher vesting percentage in the MEP due to service with other participating employers, that higher vesting percentage will need to be preserved in the receiving 401(k) plan but only for the transferring balance. Check the 411(d)(6) rules for items that must be preserved and then be sure to amend the receiving 401(k) plan prior to accepting assets from the MEP; otherwise, you risk a disqualifying event for your client.