IRS APPROVES AMENDMENT OF PLAN TO PROVIDE FOR ACCEPTANCE OF ROLLOVER TRANSFERS FROM 'CONDUIT' IRAs.

UIL Number(s) 0408.03-00

                                             Date: November 9, 1994

Company A maintains Plan X which your representative asserts is a defined contribution pension plan qualified under Code section 401(a). Plan X's most recent favorable determination letter is dated * * *. Plan X accepts after-tax employee contributions.

Section 4.05 of Plan X will be amended to provide, as follows:

A Participant who has received or is entitled to receive a distribution eligible for rollover within the meaning of Section 402 of the Code from a qualified retirement plan may contribute or authorize the plan-to-plan transfer of all or part of the distribution to the Trust Fund for this Plan, to the extent permitted by law, regardless of whether he is presently eligible to participate in this Plan; provided, however, no such contribution may be made unless all of the following conditions are satisfied:

(a) If the distribution is contributed by the Participant, such contribution occurs on or before the sixtieth (60th) day following the Participant's receipt of the distribution from this plan, the prior plan or another plan or, if such distribution had previously been deposited in an individual retirement account (as defined in section 408 of the Code), the contribution occurs on or before the (60th) day following his receipt of such distribution from the individual retirement account;

(b) The distribution received from this plan, the prior plan or another plan is a distribution eligible for rollover within the meaning of section 402;

(c) The amount contributed or transferred is not more than the distribution from this plan, the prior plan or another plan less the amount, if any, considered to be a return of employee after-tax contributions; and

(d) The contribution or transfer consists of cash.

The amendment to section 4.05 of Plan X further provides, in pertinent part, that the Plan Administrator shall develop procedures and require such information to carry out the requirements of this Section.

The above amendment to Plan X will be forwarded to the Key District Office of the Internal Revenue Service which has jurisdiction over Plan X.

Your authorized representative asserts that many former employees of Company A have received distributions from Plan X and subsequently rolled over part or all of the distributions into individual retirement arrangements (IRAs) maintained on their behalf pursuant to Code section 402. Certain of these former employees have maintained their rollover IRAs separate from all other IRAs which they have maintained.

Plan X intends to offer each of those former Company A employees who previously received a distribution from Plan X and subsequently rolled over at least part of the distribution into a "conduit" IRA to roll over or transfer said IRA assets back into Plan X. Your representative asserts that, upon approval by the Plan X Administrator, any amount returned to Plan X will be credited to a "Rollover Account" established on behalf of the former employee/plan participant. With respect to those individuals who are neither making employee contributions to Plan X nor receiving employer contributions to the Plan, their "Rollover Accounts" shall represent their sole interests in Plan X.

Based on the above facts and representations, you request the following letter ruling:

That a former Plan X participant who (a) received a distribution from Plan X, and (b) within 60 days of receipt rolled over all or a part of the distribution into an IRA, or (c) caused all or a part of the distribution to be transferred directly into an IRA, and (d) has not made any additional contributions to such IRA may direct the trustee or custodian of such IRA to transfer all or any portion of the assets of such IRA to Plan X without incurring any tax liability because of the transfer.

With respect to your ruling request, for distributions made from Code section 401(a) qualified retirement plans prior to January 1, 1993, section 402 provided, in pertinent part, that "qualified total distributions" and partial distributions were eligible to be rolled over into eligible retirement plans including IRAs.

Section 402(a)(5)(E) of the Code defined a "qualified total distribution" eligible for rollover treatment, generally, as the distribution within one taxable year of the entire amount due a plan participant under a qualified retirement plan payable either because of the termination of the plan or as a lump sum distribution within the meaning of subsection (e)(4)(A) (determined without reference to subparagraphs (B) and (H) of subsection (e)(4).

Section 402(a)(5)(D) defined a "partial distribution" eligible for rollover treatment as the distribution of at least 50 percent of an employee's balance to the credit under a qualified plan payable because of the employee's death, separation from service, or permanent and serious disability, which was not one in a series of periodic payments.

Both a qualified total distribution and a partial distribution must have been rolled over into an IRA no later than 60 days after the date of receipt by the distributee.

With respect to qualified plan distributions made after December 31, 1992, Code section 402(c)(1) provides that if (A) any portion of the balance to the credit of an employee in a qualified plan is paid to the employee in an eligible rollover distribution, (B) the distributee transfers any portion of the property received in such distribution to an eligible retirement plan, and (C) in the case of a distribution of property other than money, the amount so transferred consists of the property transferred, then such distribution (to the extent so transferred) shall not be includible in gross income for the taxable year in which paid.

Code section 402(c)(4) provides, generally, that the term "eligible rollover distribution" means any distribution to an employee of all or part of the balance to his credit under a section 401(a) qualified plan except the following distributions:

(A) any distribution which is one of a series of substantially equal periodic payments (not less frequently than annually) made --

(i) for the life (or life expectancy) of the employee, or the joint lives (or joint life expectancies) of the employee and a designated beneficiary, or

(ii) for a specified period of 10 years or more, and

(B) any distribution to the extent that such distribution is required under section 401(a)(9) of the Code.

Code section 402(c)(3) provides that the rollover of an eligible rollover distribution must occur no later than 60 days after the day on which the distributee received the property distributed.

Code section 402(c)(5) provides that a transfer to an IRA resulting in any portion of a distribution being excluded from income under section 402(c)(1) shall be treated as a rollover contribution described in Code section 408(d)(3).

Code section 408(d)(3)(A)(ii) defines a distribution from a "conduit" IRA eligible to be rolled over into a section 401(a) qualified plan as a distribution from an IRA in which no amount in the account and no part of the value of the annuity is attributable to any source other than a rollover contribution (as defined in section 402) from an employee's trust described in section 401(a) which is exempt from tax under section 501(a) or from an annuity plan described in section 403(a) (and any earnings on such contributions), and the entire amount received (including property and other money) is paid (for the benefit of such individual) into another such trust or annuity plan not later than the 60th day after the day on which the individual receives the payment or distribution.

Amounts may be rolled over from a "conduit" IRA to a Code section 401(a) qualified retirement plan either by an IRA owner's receiving a distribution from the IRA and rolling it over to the plan, or an IRA owner's causing the IRA account to be transferred to the plan without his receiving a distribution of the IRA amounts.

Neither the Code nor the Income Tax Regulations promulgated thereunder preclude an IRA owner who previously rolled over a distribution from a qualified retirement plan into his "conduit" IRA from rolling over amounts from said "conduit" IRA into the plan from which the initial distribution was made.

Finally, the Service has taken the position that the term "employee" for purposes of Code section 402 and the term "individual" for purposes of section 408(d)(3) include a retired employee. We believe that this Service position governs your ruling request. And, we believe that, consistent with the Service's interpretation of "employee" and "individual," an individual who receives a distribution from the qualified plan in which he participated upon his separation from service from the employer maintaining the plan, and rolls over the distribution into a "conduit" IRA may then cause the amounts in the "conduit" IRA to be transferred to that qualified plan although the individual remains a former participant of the plan and is not eligible to either make employee contributions to the plan or have further employer contributions made to the plan on his behalf.

Thus, with respect to your ruling request, we conclude as follows:

That a former Plan X participant who (a) received a distribution from Plan X, and (b) within 60 days of receipt rolled over all or a part of the distribution into an IRA, or (c) caused all or a part of the distribution to be transferred directly into an IRA, and (d) has not made any additional contributions to such IRA may direct the trustee or custodian of such IRA to transfer all or any portion of the assets of such IRA to Plan X without incurring any tax liability because of the transfer.

This ruling assumes that Plan X will meet the requirements of Code section 401(a) at all times relevant thereto, and does not consider any qualification issues raised by section 4.05 of the Plan. Furthermore, it assumes that the "conduit" IRAs from which amounts referred to herein will be transferred will meet the applicable requirements of Code section 408, and that the distributions that are the subject of the request are distributions eligible for rollover treatment within the meaning of Code section 402. Finally, it assumes that the rollovers referred to herein were made on a timely basis.

                                   Sincerely yours,