Plan Termination

[PS]

Hi, 

Looking for some guidance. I assisted with a plan termination, As per the plan sponsor's direction all unresponsive participants fund were rolled over to an IRA account however the plan sponsor has now come back stating the funds will require to be rolled over to the acquiring company 401k plan. 

The plan sponsor is ready to connect with the IRA provider to provide direction to rollover the funds to the acquiring company 401k.   I have two questions. 

• I thought funds from an IRA account can not be rolled over to a 401k plan, is that not true? can the plan sponsor direct the IRA provider to rollover the funds to the 401k plan. 
• The plan sponsor will make the account whole ( is ready to do any gain and loss calculation) and send the money to the IRA provider, so that the IRA provider will directly send the funds to the acquiring company record keeper.  My assumption was the funds needs to come into the terminating plan have the correction done and then rollover the funds to the acquiring company is this not true? 

[ESOP Guy]

My reaction to this are as follows:

1) Why are you involved?  It sounds like you did your job and helped terminate the plan per their instructions.

2) I don't see how the plan sponsor has legal authority over the IRAs to direct anything.  The IRA isn't part of any plan of theirs.  That is the point of doing the force out to an IRA.  They trustee no longer is responsible for the funds becasue they no long have any authority.  I really question of the plan sponsor has a legal right to direct someone's IRA.  You might want to ask a lawyer if you could be legally liable if you help them do this.  I am shocked the IRA custodian is agreeing to do this.

3) I would not put any assets back into the old plan's trust if the old one has been fully paid out and the final 5500 was filed.  The plan is gone.  

 

This sounds like a mess I would not want any part of if it were me. 

 

[Bird]

I'm not sure what your role is here but personally, I would let it play out - that is, don't waste much time on it, and let the sponsor (is this the new sponsor or the old) try to get the money. I seriously doubt the IRA provider will cooperate and it goes away. Any idea why this is even a "thing"?

...just saw ESOP guys response; we are in agreement on this.

[PS]

3 minutes ago, ESOP Guy said:

My reaction to this are as follows:

1) Why are you involved?  It sounds like you did your job and helped terminate the plan per their instructions.

2) I don't see how the plan sponsor has legal authority over the IRAs to direct anything.  The IRA isn't part of any plan of theirs.  That is the point of doing the force out to an IRA.  They trustee no longer is responsible for the funds becasue they no long have any authority.  I really question of the plan sponsor has a legal right to direct someone's IRA.  You might want to ask a lawyer if you could be legally liable if you help them do this.  I am shocked the IRA custodian is agreeing to do this.

3) I would not put any assets back into the old plan's trust if the old one has been fully paid out and the final 5500 was filed.  The plan is gone.  

 

This sounds like a mess I would not want any part of if it were me. 

 

The acquiring company reached out to me and I felt they should consult with the counsel before the proceed hence I  wanted to be double sure of what I'm conveying.  Thank you. 

[david rigby]

Yes, to all the above advice.  It might be prudent to do a little due diligence (and documentation) to make sure the plan was formally (and correctly) terminated.  It cannot be both a merger and a termination.  If the latter, then you know to step aside.

[TheBoxMan]

Was this a plan covered by the PBGC? If so, this plan was not correctly terminated. A plan cannot rollover the benefit for non-responsive participants to an IRA. For terminations post-2018, participants who do not respond are considered missing. Pursuant to 29 C.F.R. § 4050.103(a), the plan must provide for a missing distributee's plan benefit by filing with the PBGC Missing Participant program and either purchase an irrevocable commitment from a private insurer or transfer the value of the distributee's benefit to the PBGC Missing Participant program.

If this plan termination is audited by PBGC, they will make the plan purchase annuities for these participants or transfer the money to the PBGC Missing Participant program. Even if plans purchase annuity certificates for missing participants, they still need to report those missing participants to the PBGC.