Has anyone else run into terminated participants who are rolling money

[Guest sheadan]

Has anyone else run into terminated participants who are rolling money over to a new employers plan that requires a letter from the "old plan" that it is a qualified plan? By the way in both cases we've rec'd the request the money was coming out of a group contract with a major carrier!

[Guest]

yes. and we require all our plans to have a determination letter as well. (remember, you have to have one if you want to use APRSC) so all we do is send a copy of the determination letter. that is all that was ever asked for.

[Guest wlank]

Yes!

A while back I had a new employee in one of my plans who wanted to do a trustee/trustee rollover from the previous employers plan. The folks with the money (a large insurance company) wanted all sorts of things from me (the new plan). I started asking a few questions. Found out that the old plan has the duty to prove that the money is eligible for rollover - the new plan does not have to prove anything.

To make a long story short, the old plan was a SEP and the money was NOT eligible for rollover into new plan. I like the idea about the determination letter. All rollovers that my plans accept will now require that.

Bill

[rcline46]

First, no plan is ever required to had a determination letter, so there may not be one. Second, during the RAP, any new plan may not have applied for a letter. Third, there is no consequence to the recipient plan should the monies not come from a 'qualified' plan.

We send the document pages stating the plan is intended to be qualified under 401(a) and have not had problems. You need to quote the final regs to the recipient plan to get them to be reasonable.

[QDROphile]

rcline46: One consequence of acceptance of ineligible money is the requirement that the money and related earnings must be distributed upon discovery of ineligibility. That may involve some work, depending on the accounting and comingling of funds. A bit of due diligence is warranted. But you are correct that the regulations are designed to provide comfort to the receiving plan.

[Alf]

The risk is on the accepting plan. Treasury regulations protect plans that accept invalid rollover contributions if, among other things, the plan reasonably concludes that the contribution is a valid rollover contribution. To do this the receiving plan can get evidence that the distributing plan has a determination letter, that the distributing plan satisfies Code Section 401(a), or that the plan is intended to satisfy 401(a) and the administrator of the distributing plan is not aware of any operational problems that would result in the disqualification of the distributing plan.