Exit Policy

Distribution and IRA Rollover Policy for a Multiple Employer Plan

  • When a worksite employer (client company) that has adopted the Multiple Employer Plan leaves the Professional Employer Organization (PEO), the worksite employer is considered to have a discontinuance of participation in the plan, however the plan is not terminated.
  • See Reg. 1.413-2(a)(3)(iii) and the plan document.
  • Also check IRS form 5310 instructions on terminating a plan.
  • The worksite employer can establish another approved Defined Contribution successor plan and request a plan to plan transfer of all employee assets. Otherwise, if a distribution or plan to plan transfer does not occur, the participant may re-allocate their account at will and view their daily valued account balance on the web 24 hours per day until termination of service occurs or age 59 1/2 is reached, at which time they may request a distribution.
  • An employee must be separated from service from both the Professional Employer Organization and the worksite employer to get a distribution or IRA rollover as explained by the plan document, the enrollment material, and IRS code sections 413 (c) and 1563.

See IRS Revenue Procedure 2002-21 (Link requires Adobe Acrobat) for a discussion on Professional Employer Organizations, multiple employer plans and the status of client companies that adopt the Multiple Employer Plan.