Qualified Replacement Plan

[Guest2]

Terminating DB plan has excess assets to be transferred to an QRP (which is the sponsors existing 401k PSP).   In the first year of the transfer,  can the sponsor use part (greater than 1/7) of the excess to fund the previous years accrued profit sharing contribution?       For example, transfer happens in 2025, want to use excess assets to fund 2024 profit sharing contribution in 2025. 

[John Feldt ERPA CPC QPA]

Yes and No. They can use more than 1/7. No, check the rule on this, but I am pretty sure they can’t allocate toward 2024 by using money transferring in during 2025.

[david rigby]

My recollection is that there is NO reg corresponding IRC 4980.  It is always a good idea to re-read the text of the statute.

https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section4980&num=0&edition=prelim

 

[Peter Gulia]

And confirming David Rigby’s recollection, part 54 of subchapter D of chapter I of title 26 of the Code of Federal Regulations shows no Treasury rule or regulation to interpret Internal Revenue Code of 1986 (26 U.S.C.) § 4980. https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D

 

[Guest2]

Thank you all.

[Artie M]

Right, look to the statute.  §4980(d)(2)(C) states:

(C) Allocation requirements

(i) In general.  In the case of any defined contribution plan, the portion of the amount transferred to the replacement plan under subparagraph (B)(i) is

(I) allocated under the plan to the accounts of participants in the plan year in which the transfer occurs, or

(II) credited to a suspense account and allocated from such account to accounts of participants no less rapidly than ratably over the 7-plan-year period beginning with the year of the transfer.