{"id":32036,"date":"2008-03-26T16:35:41","date_gmt":"2008-03-26T21:35:41","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/uncategorized\/new-treasury-regulations-protect-qualified-plans-from-invalid.html"},"modified":"2008-03-26T16:35:41","modified_gmt":"2008-03-26T21:35:41","slug":"new-treasury-regulations-protect-qualified-plans-from-invalid","status":"publish","type":"corporate","link":"https:\/\/corporate.findlaw.com\/corporate-governance\/new-treasury-regulations-protect-qualified-plans-from-invalid.html","title":{"rendered":"New Treasury Regulations Protect Qualified Plans From Invalid Rollovers"},"content":{"rendered":"
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In the modern workplace, it is almost expected that employees will work for several different employers during their careers. With a highly mobile workforce comes the likelihood that as workers move to a new company they will bring with them retirement plan assets from a previous employer. Congress recognized this situation and, as part of the Unemployment Compensation Amendments of 1992, enacted legislation that made it much easier for employees to roll over their retirement money with them from job to job, while retaining the tax deferral provided under most employer-sponsored retirement plans – providing so-called "pension portability".Practitioners feared that the tax-qualified status of plans accepting rollover distributions was placed at risk if the plan distributing the rollover later turned out not to be qualified at the time the distribution was made. The U.S. Department of Treasury has issued final regulations, effective as of April 21, 2000, providing specific rules granting relief from the risk of disqualification to an eligible retirement plan that inadvertently accepts an invalid rollover contribution (the "Regulations").<\/font>In order to receive this relief, the plan administrator of the receiving plan must reasonably conclude that the rollover contribution is a valid rollover contribution. If the administrator later determines that the rollover contribution was invalid, the plan must distribute the invalid rollover, plus earnings, to the employee within a reasonable period of time.<\/font>Reasonably Conclude. It is not necessary for a distributing plan to have a favorable IRS determination letter in order for a plan administrator of a receiving plan to reach a reasonable conclusion that a contribution is a valid rollover contribution. The preamble to the 1998 amendment to the proposed regulations stresses that none of the examples in the proposed regulations were intended to describe the only types of information that a plan administrator can find to be sufficient and the examples are not intended to preclude reliance on other types of information, such as opinions or statements regarding the plan's qualification provided by appropriate professionals with expertise in plan qualification requirements.<\/font>The Regulations provide various examples in which a participant presents the new employer with the following hypothetical situations and, in each case, the plan administrator may reasonably conclude that the plan is qualified and that a rollover contribution from such a plan satisfies the treatment as a valid rollover contribution:<\/font><\/p>