We have 5 plans with a newly formed healthcare system, one of which is an electing church plan. The other 4 are non-electing church plans and we are considering merging the 5 plans. In a discussion with IRS National Office, we were advised that they were not aware of any request for a private letter ruling to merge an electing plan with a non-electing plan. The reason for no requests they believe is because of the irrevocability of the 410(d) election.However, we were encouraged to submit a request stating our case and see what happens. I believe it is worth a shot, since we can withdraw the application if it doesn't look as if we will get a favorable ruling.Any thoughts?

Also, it has been suggested that we merge the 4 non-electing plans and set up a trust to hold the assets of the merged plan as well as the assets of the electing plan. I'm not certain of the advantages here other than may be cost savings. Any comments would be welcomed.

The IRS suggested we terminate the electing plan and transfer the assets to the newly merged non-electing plans. I believe we would have to offer participants the opportunity to take distribution which is not what the client wishes. Any thoughts here? THANK YOU!!

There are IRS rulings permitting the merger of nonelecting church plans with ERISA covered plans. See, for example, IRS private letter rulings 9717039 and 9810036. [I believe there are several other rulings that deal with the same subject.] It seems to me that these rulings should support a plan merger in your situation. I would argue to the IRS that, as long as certain key requirements are preserved in the merged plan (e.g., anti-cutback, spousal consent, etc.) then the fact that the electing plan had made the "irrevocable" section 410(d) electioin should not be an issue (because the key provisions remain in place--they haven't been revoked). Of course, the employer must be willing to operate the merged plan with these requirements in it, but at least the rulings suggest a way to do this.

------------------
Danny Miller
Conner & Winters
1050 17th St., N.W.
Suite 810
Washington, D.C. 20036

(202) 783-5711
dmiller@cwlaw.com

A private letter ruling might be a good idea.

As a followup to Mr. Miller's response, would you have to preserve the key elements for only those former electing plan participants or would they have to be applied to all participants in the surviving plan?