When a company decides to leave Administaff and set up their own benefits there are a couple of issues regarding 401k I am unsure of:

1. Are distributions from Administaff eligible for cash dostribution or rollover to an IRA or should they be rolled into the new 401k based on "same desk" rule?

2. There have been some adverse rulings from IRS regarding the qualification of the Administaff plan. Some attorney's I work with advise against accepting Administaff rollovers as they may "taint" the new 401k plan. Any thoughts or opinions on this issue?

What is Administaff?

Administaff is the nations largest employee leasing organization

My understanding is that the Administaff plan is a co-sponsored plan. In this case any carve-out of an individual employer should be regarded as a continuation of the plan. Therefore there is no distributable event and money cannot be rolled out of the plan. Any movement of money to the new plan would be trust-to-trust. You will also have to be aware of any "protected benefits" which must be continued under the new plan.

If you have concerns about tainting the new plan, I would suggest that you be prepared to leave those funds in the Administaff plan, though the company would continue to be a co-sponsor. Yuk!