Successor Plan Rule > Roth Contribution

[TPS]

Target's 401(k) Plan (allows Roth) plan is terminated in connection with corporate merger. Successor plan rules mandate target plan's Roth deferrals must be transferred to the acquirer's 401(k) Plan (does not allow Roth).

402A regs define "designated Roth account" as a separate account... to which designated Roth contributions are permitted to be made in lieu of elective contributions, which obviously applies in the general direct rollover context. That said, if the acquirer does not want to permit Roth, would this prevent a direct plan-to-plan transfer of Roth deferrals otherwise required under the successor plan rules? Hope is to simply set up separately accounted Roth bucket which will be distributable from the acquirer's plan at the same time/manner as pre-tax deferrals. Thoughts? Any guidance I'm missing?

Thanks in advance.

[Lou S.]

I don't believe the right to make ROTH contributions is a protected benefit so I don't see any reason why you couldn't set up a ROTH source that does not accept new deposits in the accepting plan.

That said I also don't have any formal IRS guidance to point you to. Perhaps someone else will have something more definitive.

[QDROphile]

I am missing the premise concerning the successor plan rules. If Target's plan is terminated before the closing of the merger, the plan maintained for Target employees after the merger is not a sucessor to Target's plan. That allows transplanting accounts by rollover. The Roth accounts can be blocked by the post-merger plan and the other accounts can be rolled over. That may be unacceptable becuase it would allow participants to dispose of accounts in other ways.

I agree with Lou S. that you can set up your separately accounted frozen Roth buckets if you merge the Target plan in to the aquirer plan.