Printer Friendly

Legal.

Q: Now that my association is again allowed to sponsor 401(k) plans for staff, may we roll the assets of our other benefit plans into a new 401(k)?

A: The recently enacted Small Business Job Protection Act of 1996 permits tax-exempt employers to adopt 401(k) plans beginning on January 1, 1997. Since the Tax Reform Act of 1986, many tax-exempt employers were not permitted to offer 401(k) plans. However, numerous 501(c)(3) and 501(c)(6) organizations have maintained other types of "qualified retirement plans" for their employees. In addition, 501(c)(3) organizations, but no other category of exempt organizations, were (and still are) permitted to maintain 403(b) programs whereby employees are permitted to defer salary into 403(b) annuities or custodial accounts.

The new law permits tax-exempt organizations to establish new 401(k) plans. It also permits an employer to roll the assets from certain qualified retirement plans (except 403(b) plans) to a new 401(k) plan. Section 501(c)(3) organizations are not permitted to roll assets from 403(b) annuities or custodial accounts into a 401(k) plan. An association also may not move Section 457 deferred compensation plan assets into a 401(k) plan.

Rolling assets from another qualified retirement plan to a 401(k) plan may be as easy as the employer amending its current defined contribution plan to permit employees to make 401(k) contributions, or it can be as difficult as terminating its current pension plan and distributing all the assets to participants. Under the latter scenario, the participants could choose to transfer their shares of assets to the new 401(k) plan or roll the distribution into another qualified retirement vehicle, such as an Individual Retirement Account.
COPYRIGHT 1996 American Society of Association Executives
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1996, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:new 401(k) plans under the Small Business Job Protection Act of 1996
Author:Collins, Michael J.
Publication:Association Management
Date:Dec 1, 1996
Words:293
Previous Article:Technology and governance.
Next Article:Leading responsibly.
Topics:


Related Articles
Small business tax solutions.
Benefits for small business: Clinton plan could expand retirement coverage for up to 10 million workers.
Pension simplification finally arrives: the employee benefit provisions of the Small Business Job Protection Act of 1996.
Victory at last.
New hire rollovers don't trigger immediate coverage testing requirement.
New strategies for new laws.
Taking stock of the Boxer bill.
The safe-harbor solution.
Employee benefits news you can use: here are some of the more important developments CPAs need to make their clients and employers aware of for 2006.

Terms of use | Privacy policy | Copyright © 2021 Farlex, Inc. | Feedback | For webmasters