Sponsor left a MEP

[CLE401kGuy]

A sponsor adopting an open MEP decided to start its own plan.   So they gave notice to the MEP and the balances for the active participants were rolled into the sponsors new plan.   Balances for terminated people were left in the MEP though.   Should the balances for the terminated people have moved as well?

Have another recent situation when the plan sponsor was acquired by another company and the acquired sponsor is transferring into the acquiring entity's plan.   Again, do the balances for participants terminated prior to the acquisition move into the acquiring entity's plan?

[chc93]

1 hour ago, CLE401kGuy said:

A sponsor adopting an open MEP decided to start its own plan.   So they gave notice to the MEP and the balances for the active participants were rolled into the sponsors new plan.   Balances for terminated people were left in the MEP though.   Should the balances for the terminated people have moved as well?

Have another recent situation when the plan sponsor was acquired by another company and the acquired sponsor is transferring into the acquiring entity's plan.   Again, do the balances for participants terminated prior to the acquisition move into the acquiring entity's plan?

For your second situation... we are currently in the process of this situation.   The acquiring entity plan is going to transfer all participants (active and terminated) from the acquired entity plan.  If the acquiring entity plan is leaving back the terminated participants, the acquired entity plan will still have participants, and will still have Form 5500 filings until all assets are paid out.  If the acquired entity no longer exists, and the acquiring entity is not willing to take over sponsorship of the acquired entity plan, what happens then?  This might be a consideration to transfer all participants.

Not sure about the MEP situation... maybe the MEP "sponsor" will have guidelines...

[Luke Bailey]

On ‎7‎/‎31‎/‎2019 at 2:17 PM, CLE401kGuy said:

A sponsor adopting an open MEP decided to start its own plan.   So they gave notice to the MEP and the balances for the active participants were rolled into the sponsors new plan.   Balances for terminated people were left in the MEP though.   Should the balances for the terminated people have moved as well?

Have another recent situation when the plan sponsor was acquired by another company and the acquired sponsor is transferring into the acquiring entity's plan.   Again, do the balances for participants terminated prior to the acquisition move into the acquiring entity's plan?

I think it is optional, CLE401kGuy. The reasons to do it (i.e., take the transfer for the terminateds) are that some of the terminated employees might come back to work for their former employer and there is also a fiduciary reason, i.e the employer of those former employees might (it should make this determination) be a better steward of the terminated employees' funds, in multiple ways. Also, presumably administrative communications will need to occur between the employer and the MEP with regard to the terminated employees and their balances, even if they don't return to work, and the need for these administrative tasks, which are no longer justified by having the actives in the MEP, could be eliminated by rolling over balances of terminated employees.

[Ilene Ferenczy]

I agree with Luke.  If the spinoff agreement (or perhaps the original participation contract with the MEP in that situation) is written properly, it will address the treatment of terminated participants.  In absence of explicit rules, it becomes the responsibility of the Plan Administrator to interpret.  On the MEP situation, I'd be surprised if the MEP sponsor really wants to continue to deal with the terminated participants.  Particularly for an Open MEP situation, where each employer's plan needs a separate 5500.  Once the adopting employer has spun off active participants, there are actually 2 plans sponsored by that employer -- the one in the MEP that contains the terminated participants and the one that the actives were spun into.  What a mess!  Bad planning ...

 

FWIW.

[MSN]

Adding a wrinkle to an already messy situation - What if there are uncashed check assets in the MEP from a terminated employee of the entity that spun off had who taken a distribution prior to the spin off date?  Would the uncashed check assets be part of the spinoff?  I haven't seen this detail in a spinoff agreement before.