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jkharvey

General Question about Merger

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I am getting myself confused here. Company A sells part of its stock to Company B. Prior to the sale the companies are not related. As a result of the sale they are not part of a controlled group.

A and B each have their own 401k/PS plans. Co. A wants to merge its plan into Company B's plan.

Co. A needs to prepare an amendment to merge but do they actually have to do a separate termination amendment? Is Co. A's plan actually "terminated" as a result of the merger?

If the merger occurs in the middle of a Plan Year, I'm thinking that Co. A will prepare a plan valuation based on compensation etc. as if the Plan Year were 1/1- date of merger. Is this correct? Does this mean that the 5500 would have to be filed as if this were a short year?

Thank you.

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A merger is a continuation of the plan, but in combined form with another plan. So you only need to have merger documents, not termination documents. (Note that your merger documents need to cover both the merger of both the plan AND the trust.)

If you're just picking an arbitrary date for the merger, you should consider 12/31 as a possible date. That will resolve many of reporting issues. Plan A assets may not physically transfer at that date. But you would generally report them as owned by Plan B at that date if both the plan and trust documents have been properly drafted to legally transfer them at that date.

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"Prior to the sale the companies are not related. As a result of the sale they are not part of a controlled group."

Won't the merger create a multiple employer plan? Make sure that the resulting plan has multiple employer languge regarding amendment, testing, etc..

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Prior to the sale the companies are not related.  As a result of the sale they are not part of a controlled group.

Won't the merger create a multiple employer plan? Make sure that the resulting plan has multiple employer languge regarding amendment, testing, etc..

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