Multiple employer 401k plan terminates

[Belgarath]

So, suppose you have a bona fide "multiple employer plan" that decides to terminate. Do you see any "successor plan" problem if one or more of the individual employers then set up their own plans immediately? I'd think that there shouldn't be a problem because it isn't the "same" employer? I haven't yet done any research on this, just wondered if anyone had an opinion?

[Kevin C]

Sorry, but I read it differently. Employer A is one of the sponsors of a multiple employer plan. That plan terminates and Employer A adopts a new Plan A. It's the same employer. That makes the new Plan A both a "successor plan" under 1.401(k)-2©(2)(iii) which affects ADP/ACP testing and SH and an "alternative defined contribution plan" under 1.401(k)-1(d)(4)(i) which affects distributions to actives upon plan termination. i would suggest a spin-off of their portion of the multiple employer plan into the new plan.

If it's a SH 401(k), it could get interesting depending on the timing. We are talking to a prospect that left a calendar year SH PEO multiple employer plan at the end of Oct and their current TPA set them up with a document for a new SH plan with a short initial year of 11/1-12/31. The same TPA told them they could set up a cash balance plan that allows for salary deferrals in addition to their 401(k).

[Belgarath]

Thanks Kevin. This could be difficult for one of those big MEP's with hundreds of employers who sign on with cookie cutter plans if the sponsoring organization decides to terminate the entire arrangement...

As I said, I haven't done any research, and don't have a "real life" situation - just one of those discussions that came up in a "what if" context.

[austin3515]

I would think these guys can handle a spin-off. Standard operating procedure for these guys. In light of KEvin C's interpretation (which I agree with) they have no choice but to facilitate a spin-off.