Rolling Over Excess Assets To A Qualified Replacement Plan

An overfunded DB plan covering only the 100% owner is terminating and a QRP 401(k) plan is being set up to receive the excess assets while the participant's DB benefit will be rolled over to an IRA.  She will need to complete a distribution election form for the IRA RO, but does an election for the RO of only excess assets to the QRP also need to be made?  If so, would anyone have a sample they can share? 

Also, I imagine the RO to the QRP would need its own 1099-R, but what code would be used - G for direct RO?  This is a first for me so any help would be great! 

It's not a rollover.  It's a transfer.

Correct, it is not a distribution, it must be a direct transfer to the QRP. The owner does not need to make an election as the participant but should make a resolution for the transfer as the employer unless initial termination resolution already addressed. 

Thank you both - very much appreciated.

isn't there a 7-year rule covering the maximum amount that can be rolled over into the QRP?

The 7-year rule outlines how long the amounts can take to then be allocated (ratably) under the QRP.  So with a 1-person plan, you could estimate looking at having a cap of around 420,000 since you wouldn't be able to use up anything further by the deadline.  But it's not a maximum specific dollar amount under a statute.

There seems to be an out - IRC sec. 4980(d)(2)(C) says:

(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.

(ii) Coordination with section 415 limitation - If, by reason of any limitation under section 415, any amount credited to a suspense account under clause (i)(II) may not be allocated to a participant before the close of the 7-year period under such clause—

(I) such amount shall be allocated to the accounts of other participants, and

(II) if any portion of such amount may not be allocated to other participants by reason of any such limitation, shall be allocated to the participant as provided in section 415.

Provided max allocations are done, Item (ii)(II) indicates that allocations can continue to be done indefinitely.  Works great if the owner is the only participant, otherwise not so much.  

While that is arguably a reasonable interpretation of the statutory language, I don't believe the IRS subscribes to that interpretation. Although PLR's can't be cited as precedent, see PLR's 201221059, and 201147032 for an indication of IRS stance (granted that they may have changed their approach since then). I'd recommend a client get an opinion from an EISA attorney before taking the "aggressive" approach, if the amounts involved are substantial.

Sounds good, I have one-life plan that is severely overfunded due to the fact that she froze the accrued benefit quite some time ago  anymore due to cost consideration and a downturn in business;  there is $1M plus in the plan.  We were told by the EA you can only roll over to a QRP up to the 415 max each year for 7 years max.

Did she freeze the benefit AT her 415 limit?  Could the plan allow for excess assets to be reallocated to the participant up to her DB 415 limit first?