Some plan sponsors allow participants (and, in some cases, new employees expected to become participants) to transfer to the plan, by direct rollover, amounts previously accumulated in a prior employer's plan. However, many plan sponsors have been reluctant to permit this consolidation because the rollover of funds from an unqualified plan could taint the recipient plan. In order to promote the portability of funds and encourage the preservation of retirement savings, the IRS recently issued Revenue Ruling 2014-9 to simplify the process by which a plan administrator can ensure that the plan from which the funds are to be transferred is a qualified plan.
The Department of Labor maintains the EFAST2 database of current Forms 5500 (Annual Return/Report of Employee Benefit Plan) and Forms 5500-SF (Short Form Annual Return/Report for Small Employee Benefit Plans) which sponsors of most qualified retirement plans are obligated to file. In completing these forms each year, plan administrators are obligated to enter certain codes on line 8a of Form 5500 or line 9a of Form 5500-SF to identify key plan characteristics. The entry of Code 3C indicates that the plan in question is not intended to be qualified under Internal Revenue Code Section 401, 403 or 408 and will serve as a red flag that a rollover from such a plan should not be accepted. On the other hand, the entry of codes other than Code 3C, will suffice to establish that the plan from which the rollover is to be made is a qualified plan.
The EFAST 2 system can be accessed at www.efast.dol.gov and clicking on the link for Form 5500/Form 5500-SF search.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
