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Asset Purchase with owner continuing 401k


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Company A is acquired by Company B on 3/27. Company B wants to establish a new 401k plan and merge Co A asset into the new plan. Since it will take about 60 days to get new plan operational, can Co B become the sponsor of Co A plan in the meantime? My concern is the employees no longer work for company A on 3/28.

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If they take over responsibilities for the plan, do they simply amend the plan to change its name and tax id # going forward.

That's probably how I would do it (it's never as easy as it seems...if it is an asset purchase, then it really is a new company/new plan sponsor; you probably want to be specific about crediting service with the old sponsor).

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I have a personal bias against assuming plans of another employer. By the time you do all the due diligence to feel comfortable with assuming all the assets and liabilities (especially the liabilities) I swear it is often easier, possibly less expensive, and cleaner to just set up a new plan and credit prior service with the old employer. Let the prior employer worry about terminating it.

Probably everyone else thinks my opinion is crazy, but I'm used to that.

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I have a personal bias against assuming plans of another employer. By the time you do all the due diligence to feel comfortable with assuming all the assets and liabilities (especially the liabilities) I swear it is often easier, possibly less expensive, and cleaner to just set up a new plan and credit prior service with the old employer. Let the prior employer worry about terminating it.

Probably everyone else thinks my opinion is crazy, but I'm used to that.

Most plan attorneys I know say the same thing. Just set up a new plan. You don't have to worry about hidden and unknown disqualifying defects.

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I have a personal bias against assuming plans of another employer. By the time you do all the due diligence to feel comfortable with assuming all the assets and liabilities (especially the liabilities) I swear it is often easier, possibly less expensive, and cleaner to just set up a new plan and credit prior service with the old employer. Let the prior employer worry about terminating it.

Probably everyone else thinks my opinion is crazy, but I'm used to that.

While I agree with this if they want to merge in t he assets as the OP suggests, it's quicker, easier & cheaper to just amend the existing plan than to start a new one and merge the old one in.

Now if the old sponsor is terminating the plan and allowing rollovers, you have a whole different story as people can simple elect a rollover to the new plan, assuming it allows rollovers in.

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  • 3 weeks later...

New owners decided to create a new 401k Plan and to require current employer to decide about exiting plan. Current Plan is terminating existing plan and giving employees the right to receive cash-out of their accounts. Any reason that the new entity/plan cannot establish a safe harbor plan in 2015.

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