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.