401(k) to 403(b) spin-off/merger within same controlled group?

[cathgrace]

Hi! First-time poster, ERISA-newbie here. Here's the situation:

Parent Non-Profit Company sponsors a 403(b) plan and Subsidiary For-Profit Company sponsors a 401(k) plan. The company wants to transfer a group of employees from the Subsidiary to the Parent (i.e., within the same controlled group). My question is this: What are the options for transferring assets from the 401(k) plan to the 403(b) plan?

I realize that the IRS generally does not allow mergers or transfers of assets between 401(k) and 403(b) plans. I also conclude that transferring employees to the Parent would not automatically create a distributable event in order to rollover assets from the 401(k) to the 403(b) plan, as they are transferring employment to a member within the same controlled group. Thus, there is no severance of employment that would allow for the distribution.  

I'm exploring other options, including a complete termination of the 401(k) plan, but I'm having trouble finding a viable solution. Any ideas?

[Larry Starr]

Viable solution? What exactly is the problem you are trying to solve?  Yes, they can move the employees.  Yes, the employees can participate in the 403(b) plan.  So what if the assets of their prior 401(k) participation stay in the 401(k) plan until they actually terminate?  What is the problem with that?  I'm not sure there is anything to solve for.

Termination of the 401(k) sounds like taking a sledgehammer to kill a fly!  

[Mike Preston]

On 10/30/2019 at 12:31 PM, cathgrace said:

Hi! First-time poster, ERISA-newbie here....

Something tells me there is an advisor in the 403b loop that thinks it is a problem because that advisor has no interest in the 401(k).

With that said, congratulations on such a well worded and complete first posting.  Would that it were for everybody. Welcome.