Out with the old and in with the new

[Hoard1]

Employer who is the sole participant in a DB Plan would like to terminate it effective 7/31/00 and start a new one effective 8/1/00 because other employees will participate as of that date and he does not want to comingle prior assets. Aside from combining benefits for 415 is anything else I should be concerned with adopting this new Plan.

[Lorraine Dorsa]

Assuming the existing plan is properly terminated (amended for current pension law, etc), I see no problems (other than the expense involved) with your scenario. If the plan was covered by the PBGC and there were a reversion of assets, there might be an issue with regard to reversion followed by a replacement plan, but since you say the sole participant is the employer (owner) PBGC is not an issue.

Re 415 limits, be careful if (as is highly likely) the plan assets upon termination are not exactly equal to the plan benefits--presumably either 1) excess assets will be reallocated which increases the participant's benefit or 2) unfunded benefits waived which decreases his benefit.

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