401(k) and DC merger

[ERISAWiz]

A multiemployer 401(k) plan and a DC plan merged. Each participant now has two accounts within the merged fund: a 401(k) (elective deferral) account and a DC (employer contributions) account.

A participant wants to roll over his 401(k) account into an IRA. Is he forced to roll over the entire 401(k) account, or can he roll over just a part of the 401(k) account? And if he rolls over all or part of the 401(k), what legally must happen with the DC account? Is he forced to take a distribution on the entire DC account or just a part or nothing at all?

Thanks for your help.

[Lou S.]

How old is he?

Is he an active or former employee?

What does the document say about distribution options?

[ERISAWiz]

Thanks for responding Lou.

He is retired.

The normal form of benefit is a joint and survivor annuity (for married) and single life (for unmarried). Optional is lump sum.

The problem is that the plan doesn't address what happens to the different accounts when a participant wants to make a rollover from one of them. Does the entire account need to be rolled over? And what happens to the other account? I can't find any direction on this in the Code or anywhere else.

[QDROphile]

The plan document sucks. Ideally it would say that a participant may specify that all or a portion of a lump sum distribution will be directly rolled over. It has nothing to do with elective or nonelective accounts. The plan provides for lump sum distributions. To me, that means all account balances are distributed at once in "a lump sum." He cannot get a distribution of one source account and leave the other source account in the plan. Look at your document very closely again. If it does not prevent an interpretation that would be in line with the ideal plan terms, then interpret the plan that way. The service provider needs to be on board to handle payment of one portion of the lump sum distribution as a direct rollover and the other portion as a taxable distribution

[Lou S.]

Qdrophile took the words right out of my keyboard. And said it better than I could have.

[ERISAWiz]

Thanks Qdrophile. But is there anything preventing us from amending the plan to allow him to roll over part of his account while leaving the other part in the plan?

[Lou S.]

Allowing partial distributions is allowable. You'd likely create an optional form of benefit available to all participants.

[ERISAWiz]

Lou, could you explain what you mean when you say "You'd likely create an optional form of benefit available to all participants"?