Company A maintains a 401(k) plan and a traditional defined benefit plan. The defined benefit plan has included accumulated deductible employee contributions ("ADECs") (which allowed a $2,000 per year deductible contribution for employees between 1982 and 1986). As part of a transition to a new 401(k) recordkeeper, the recordkeeper will track the assets in the ADEC, but only if it is made part of the 401(k) plan.

This raises the following issues: (1) can the 401(k) generally provide for a single beneficiary designation for both the 401(k) and the ADEC (with possible exceptions for certain separate beneficiary designations needed to comply with the general rule of providing the death benefit to the spouse)? (2) for purposes of determining the $5,000 involuntary cash-out threshold, can there be a single threshold for the 401(k) and the ADEC, or must there be separate thresholds for each?

Your response to this posting would be appreciated.

If somehow the DB plan and the 401(k) plan docs allow this to happen, then go for it. Otherwise, it seems to me that to transfer assets from plan to plan would require some sort of plan amendment. You definitely can't just do it because its administratively feasible.

Alternatively, perhaps the money still stays in the DB plan (in a separate investment account), but is just tracked on the 401(k) plan software in a separate bucket. That might work legally. It probably raises a lot of other issues, like allocations of investment income for the TPA, and processing distributions. It probably could be set up to simplify the process. Also, don't forget the spousal waiver rules that apply to the ADEC bucket (if the 401(k) happens to be exempt.

1) Maybe. But I'd say keep it clean and get 2.

2) $5,000 cash out: DB Plan - if present value of benefit is less than $5K (including ADEC), involuntary cash out okay.
DC Plan - If account balance is < $5K Involuntary cash out okay.


You have two plans, so you need to administer two plans. You're getting into very gray areas here.

To accomplish you're goals, I'd definitely try to legally transfer the ADEC to the 401(k). I should think its possible to do.