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Guest mparker2028

Dissolution of Plan Sponsor

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Guest mparker2028

Physicians group consisting of 8 doctors (equal ownership) maintains a Simple 401k Plan. 3 doctors resigned to take other jobs. The remaining 5 doctors decided that the corporation will be dissolved effective 11/1/06 and the remaining 5 docs will form two new entities, which will be unrelated after 11/1/06.

It has yet to be decided what will happen with the assets of the corporation but assuming the assets will be split between the new practices, is this an asset sale?

The plan sponsor mentioned plan termination, but wouldn't a spinoff work or a direct transfer of assets/liabilities here with one of the new practices assuming the sponsorship of the existing plan?

If the existing plan was terminated, what happens to the participant loans in the Plan? Would they be able to rolled over into the new plan of the practice where they will be working?

One of our concerns with plan termination is that this plan never submitted for a determination letter. The only amendments to it were IRS mandatory amendments and one change to add a trustee. The document provider and the employer felt that a D/L was not necessary because they were no modifications to the volume submitter in the plan design.

Thanks

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Physicians group consisting of 8 doctors (equal ownership) maintains a Simple 401k Plan. 3 doctors resigned to take other jobs. The remaining 5 doctors decided that the corporation will be dissolved effective 11/1/06 and the remaining 5 docs will form two new entities, which will be unrelated after 11/1/06.

It has yet to be decided what will happen with the assets of the corporation but assuming the assets will be split between the new practices, is this an asset sale?

The plan sponsor mentioned plan termination, but wouldn't a spinoff work or a direct transfer of assets/liabilities here with one of the new practices assuming the sponsorship of the existing plan?

If the existing plan was terminated, what happens to the participant loans in the Plan? Would they be able to rolled over into the new plan of the practice where they will be working?

One of our concerns with plan termination is that this plan never submitted for a determination letter. The only amendments to it were IRS mandatory amendments and one change to add a trustee. The document provider and the employer felt that a D/L was not necessary because they were no modifications to the volume submitter in the plan design.

Thanks

There are situations where a plan is not considered terminated merely because a company sells or otherwise disposes of its trade or business if the acquiring company continues the plan as a seperate and distinct plan or replaces it with a comparable plan. My opinion is that the disposal should result in a continuity of the that particulat trade or business. In your situation, that would be a tough argument to make.

As far as existing participant loans on, if employee's new plan allows plan loans, the plan loan offset provisions would allow a rollover of the existing loan.

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Guest mparker2028

Physicians group consisting of 8 doctors (equal ownership) maintains a Simple 401k Plan. 3 doctors resigned to take other jobs. The remaining 5 doctors decided that the corporation will be dissolved effective 11/1/06 and the remaining 5 docs will form two new entities, which will be unrelated after 11/1/06.

It has yet to be decided what will happen with the assets of the corporation but assuming the assets will be split between the new practices, is this an asset sale?

The plan sponsor mentioned plan termination, but wouldn't a spinoff work or a direct transfer of assets/liabilities here with one of the new practices assuming the sponsorship of the existing plan?

If the existing plan was terminated, what happens to the participant loans in the Plan? Would they be able to rolled over into the new plan of the practice where they will be working?

One of our concerns with plan termination is that this plan never submitted for a determination letter. The only amendments to it were IRS mandatory amendments and one change to add a trustee. The document provider and the employer felt that a D/L was not necessary because they were no modifications to the volume submitter in the plan design.

Thanks

There are situations where a plan is not considered terminated merely because a company sells or otherwise disposes of its trade or business if the acquiring company continues the plan as a seperate and distinct plan or replaces it with a comparable plan. My opinion is that the disposal should result in a continuity of the that particulat trade or business. In your situation, that would be a tough argument to make.

As far as existing participant loans on, if employee's new plan allows plan loans, the plan loan offset provisions would allow a rollover of the existing loan.

What would be a tough argument to make - that the business is continuing?

Thanks for the clarification

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