Benefits, Rights and Features

[Doghouse]

I am an ERPA representing three plans for a very small professional group. The first two plans (a defined benefit and a profit sharing) terminated and the participants were paid out. The owner was unable to liquidate the remainder of the assets and ended up establishing a 0% money purchase plan to hold those assets. The eligibility for the money purchase plan was limited to the owner, on the basis that no other contributions would be coming in, so why subject it to SAR's and the like.

An important point is that the distributions to the staff had already been made at the time the money purchase plan was established.

Now all three plans are being audited by the IRS, and they have raised the question of whether the eligibility restriction on the money purchase plan violates nondiscrimination in benefits, rights and features.

Has anyone had any experience with this kind of situation? Any thoughts?

Dog

[12AX7]

I've not heard of anything like this lately, but am curious as to what was the third plan that transferred the assets to the MP? Couldn't the remaining assets be transferred in-kind?

[Doghouse]

What third plan? There were two plans that terminated, and the remaining assets were transferred in kind to the newly established MP.