Can a Safe Harbor Plan be amended to add Rollovers

[CharlesLeggette]

Client has a safe harbor KPlan…does not permit rollovers[i took over without a document restatement]. They are terminating their CB plan in a month or two and want to roll CB distributions to KPlan…100% of ees [a small number] want to do this.

The Safe Harbor notice of course doesn’t mention a Rollover Employee account.

Is a rollover a “Contribution” subject to the notice, in which case we cannot amend the KPlan to allow rollovers or is there wiggle room here…is there any way to classify the incoming $$ as a trustee to trustee transfer?

It seems reasonable that a Plan could add Rollovers. That is not an Employer Contribution.

Thanks in advance.

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[austin3515]

So many threads on these boards about this. Do a quick search and you should find them. The answer is YES. People take this way too far. Shame on the IRS for instilling paranoia. I swear some of these questions are akin to "can I tie my shoes if they are untied?"

Don;t get me wrong I'm not saying it's a stupid question at all. My frustration is aimed 100% at the IRS for being insane about this.

[mbozek]

All qualified plans can permit rollovers under IRC 402©. Never seen anything to contrary issued by IRS. Don't know why a rollover could be a contribution since IRC 415 regs have always stated that a rollover is not a contribution.

Complexity of language in transfers is due to many different ways congress authorizes funds to be moved tax free- rollovers, trustee to trustee transfers, conversions, recharacterizations, redesignation of IRAs, etc and limitations on use of each, e.g, direct vs indirect rollover. Transfer from a 401k plan to a Roth IRA is both a rollover and a conversion.

Cannot use trustee to trustee transfer of employee accounts upon termination of a plan because IRS requires that plan distribute participants benefits upon termination of the plan.