Money Purchase Plan merging into new 403(b) Plan

[Coleboy1]

Our client currently has a money purchase plan. They no longer want the money purchase plan and want to replace it with a 403(b) plan. Would it be considered a merger? Or do we have to terminate the MP plan?

Are there any special considerations when doing this? 

[Carol V. Calhoun]

You can't merge a 401(a) plan such as a money purchase plan with a 403(b) plan. You could leave the money purchase plan in place for the old money and just have the new money go into the 403(b) plan, but that would involve a lot of administrative hassles. Or you could terminate the money purchase plan and allow people to take their money, potentially with an option to roll it over into the 403(b) plan. 

[Coleboy1]

That's what I thought but my co-worker was disagreeing with me. I didn't know if something had changed in the rules as it's been a while since I've really work with MP plans. I just got this assigned to me in May.

[CuseFan]

Terminating the MP is probably the best option regardless, otherwise, a transfer of those accounts (versus an elected rollover) would require continued separate tracking and future annuity normal form requirement.

[Coleboy1]

I agree with terminating the MPP but the higher powers don't want that. Can the MPP be amended to a PSP?

[Carol V. Calhoun]

1 minute ago, Coleboy1 said:

I agree with terminating the MPP but the higher powers don't want that. Can the MPP be amended to a PSP?

Yes, it can be. But the existing benefit forms must be preserved, at least with respect to the portions of people's accounts derived from contributions made prior to the change. So even though the plan is now a PSP, it will be paying life annuities/joint and survivor annuities. 

[Coleboy1]

Can someone tell me the steps to amending the money purchase plan to become a PSP?  Or do I have to amend the MPP to bring the contribution to 0% and set up a separate PSP and move the assets over?

[Bri]

The 204(h) notice is certainly an important part of the process. 

Are you using a document provider?  You might have access to some boilerplate language for the changeover, but specifically referencing the required grandfathering of protect benefits.

[Jakyasar]

If 1000+ hours is already accrued (assuming the plan has 1000+ hour requirement - plz check the document) and there is no last day rule within the MPP, isn't there a 2025 contribution requirement?

As Bri said, if to freeze or terminate, 204(h) notice is required.

As Cusefan said, best to terminate and start a 403b plan as 401a plan may not be merged/converted into 403b plan, logically speaking.

Can you run MPP and 403b concurrently? If yes, must watch for 25% deduction as well as 415(c) limits.

Sorry do not remember all the MPP to PSP conversion details from 23+ years ago that was allowed with EGTRRA restatement - fuzzy memory but it was done all the time but possibly before 1000+ hour requirement.

[david rigby]

8 hours ago, Coleboy1 said:

Can someone tell me the steps to amending the money purchase plan to become a PSP?  Or do I have to amend the MPP to bring the contribution to 0% and set up a separate PSP and move the assets over?

Here's an idea:  since the "higher powers" don't know the rules and (implied above) don't believe what has been presented here, they should hire @Carol V. Calhoun to provide them some legal advice.