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401(k) Plan Merger


Guest Ilovemyjob

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Guest Ilovemyjob

Hello,

I was hoping someone could help with some guidance on the following scenario - our TPA is not sure & I am at wit's end trying to find an answer to this. Any help is greatly appreciated:

Company A purchased 80% of the stock of Company B on 01/01/07. Both A and B maintained separate 401(k) plans after the purchase. Effective 8/01/08 the employees of B became employees of A, and Company B is dissolved. The plan is to transfer the plan assets of Company B to Company A's plan before the end of ‘08. The former Company B employees are allowed to make elective contributions to Company A's Plan beginning 8/01/08. The question is: If Company A does a discretionary match for ’08, does it have to match the former Company B employees wages for the entire year or just for the period of time they were employed by Company A and were allowed to contribute to Company A's plan? There was no match for the Company B employees made on their old plan for 07.

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If the B EEs did not become A EEs until 8/1/08 and Plan A is by its terms only for A EEs (which I assume), then it would not seem logical that A could match what those who were B EEs before 8/1/08 deferred to Plan B without violating Plan A's terms--despite no match to Plan B deferrals for 2008.

Some plans define sponsoring/participating ER to include any other members of a control or affiliated service group of which the specified ER is a member. If so, then B EEs might have been eligible for Plan A since the 1/1/07 purchase of 80% of B stock by A.

It would be a good idea for A to have an ERISA attorney review the documents of both plans A and B, and dig into what notices were given to B EEs when.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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"I was hoping someone could help with some guidance on the following scenario - our TPA is not sure & I am at wit's end trying to find an answer to this."

Sometimes one can find answers by hiring people who are able to advise. And sometimes one hires those people before actions are taken that preclude more certain or favorable options.

People who handle benefits in most companies are not authorized to get proper advice and those who have the authority often won't listen and they do not include the benefits people in planning. So we have the unhappy situation where some poor soul who is just trying to do a good job has to say, "Gosh, my only unreliable source of information is not sure, so I solicted the views of strangers to make a decisioon that has tax, economic, and employee morale consequences."

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-job --

I assume you ask the question because A's plan matches based on full year comp, even for those entering in mid-year.

Look at the plan document. Look to the definition of compensation, to see if it includes compensation earned while employed by another member of the controlled group. If it mentions comnpensation in terms of amoounts earned while an employee, look at the definition of employee to see if includes only employees of this employer, and whether or not employer is broadly defined to include other members of the controlled group. Put it all together, put your left foot in, and see what you come up with--probably, as John says, on the side of only including compensation from when the B employees became employees of A. But, we can't tell without the doucment language to look at. Lucky you--you have the document (I presume).

By the way, contrary to what QDROphile says, we aren't really strangers. We're strange, maybe, but we're just like family . . . . . in fact, we're just like any other family: just a wee bit dysfunctional at times, but very normal. :rolleyes:

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Alex, what is 'People are Strange' by the Doors?

What? this isn't Jeopardy?-sorry--bad form.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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The question is...

I agree w/ Sieve that you should closely examine your definition of comp as it pertains to the section that details the match.

I also agree you should talk to an ERISA atty if any uncertainty remains. Point out to mgmt that match on 7 months of comp for all of B's employees is more expensive than the cost of a couple hours for an ERISA atty. And you should be consulting one anyway to make sure you don't have any pitfalls in merging plan B into A. Nothing like having to do a post-merger correction to ruin a couple months of your work life.

Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra

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Thanks for clearing that up for me, QDROphile.

I stewed over that puzzling question quite a bit over the weekend.

Google came up with a song I'd never heard of "Dysfunctional Family" by a musical act I'd never hear of, Cinema Bizarre.

Larry's suggestion, "ERISA Mash", made me wonder if you were thinking of the theme to the Adams Family TV show from the 60s.

Then I simply threw in the towel and gave up.

But it is ironic that the song you had in mind on this board was by the Talking Heads.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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