Huh??

[thepensionmaven]

Ex-client sponsors a 401(k) that is now being TPA'd by one of the payroll companies, and the broker wants our input on the issue of starting a new plan:

" A Qualified Retirement Plan may not be established until 12 months after all the assets have been distributed from the current plan."

As far as we know, the 12 months refers to the timing the IRS gives to liquidate the plan assets in order to qualify as a valid termination; but nothing about establishing a new plan during the time thst another plan exists.

Souns to me to be a lame reason for the TPA scare the client into keeping the plan, or possibly this is a part of the Serving Agreement that TPA is reminding client that he signed upon takeover.

Any validity, or is TPA attempting to keep the case??

[ETA Consulting LLC]

Not understanding the fact pattern. Here's what I have:

1) Client desires to terminate their current plan and start another one.

2) They are being told that if they terminate this plan, they may not establish another one within 12 months following the final distribution from the current plan.

3) The TPA is using that as a reason to encourage the client to continue to keep the plan they currently have.

Does this sum it up?

What I'm missing is whether the client intends to start of new plan; or is this a mere objection created by the broker saying you cannot start another one should you terminate.

[ESOP Guy]

Sounds like they are trying to describe the successor 401(k) rules. Just not very well maybe???

[QDROphile]

The real question to ask is what the employer wants to do. If the employer wants to escape the TPA, a new plan is unnecessary. If the employer wants to distribute benefits, the the 12-month rule under the 401(k) restrictions on distributions is relevant, although perhaps not very artfully articulated.

[Bird]

The real question to ask is what the employer wants to do. If the employer wants to escape the TPA, a new plan is unnecessary. If the employer wants to distribute benefits, the the 12-month rule under the 401(k) restrictions on distributions is relevant, although perhaps not very artfully articulated.

Exactly.

I get the idea they just want to move the assets and/or change the TPA, which doesn't require a plan termination.

Tip: people, even those working in the field, sometimes confuse "terminate services" with "terminate the plan."

[Peter Gulia]

This might be an opportunity for thepensionmaven to remind the broker that hearing nonsense from fools is among the burdens of being an EX-client.