Owner of 2 companies (A & B) offers a pension plan in which the employees of both A & B participate. Plan follows controlled group rules and files 1 5500 with 2 Sch. Ts. Owner now wants to set up a separate plan for the employees of B. Plan provisions will be the same. Assets will be transferred. The only change is 2 plans instead of 1. Why you ask....owner doesn't want to pay for a plan audit. The number of eligible participants employed by B is greater than 20% of the total eligibles. Might this be considered a partial termination of the AB plan? Appreciate any guidance anyone can offer.

Perhaps a spinoff would be more appropriate.

Why would a new plan change anything? Wouldn't controlled group still be applicable along with the same audit requirement, anyhow?

GB-According to a Rep at DOL, each plan would be looked at separately to determine if an audit is necessary. They are still a controlled group for all testing.

WDIK-Yes, a spin-off may be more appropriate.

Maybe it's just me, but I don't see "partial termination" here.

I can't believe the extra expense you created by making two plans out of one would be less than the amount you save by not doing the audit. You just doubled all of your admin expenses! Two plan docs, two recordkeepers, two 5500s... I can't believe that would be less than the cost of the audit. I would start to wonder what he/she is affraid they might find.

Most employers want to consolidate plans because the admin is cheaper. Sounds a little fishy to me.

I completely concur in Effen's remarks.

It sounds like the source of the problem may be that the auditor is charging too much. A simple solution that may solve the problem is to seek competing bids for the audit.

Of course, we already know about Effen's fees.

You get what you pay for!

Thanks to all who responded.