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Sponsoring ER Sold - Adopting ER no longer part of control group


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Short well maybe long story.

Company A had a plan in which they terminated less than 12 months ago and became an adopting ER of Company B (option of merger was not address w/prior service provider).

Company B was recently acquired by Company C (unrelated) (believe a stock sale, but not sure).

Company A is no longer part of the control group and would now like to establish a new plan.

I do not know for sure if Company B is terminating their plan, let's say they are for this example.

Since Company A had terminated a plan less than 12 months ago, they cannot establish a new plan without violating the Successor Plan Rules. So, is their only option a Spin-off from Company B's plan to a new plan? In order not to violate the Successor Plan Rules.

What if Company A received advice that they can establish a new plan and the IRS comes in after seeing their Form 5500 and says they did violate the Successor Plan Rules; what then? Is the only option Audit Cap to plead their case and correct however the IRS says in order to keep the qualified tax status of the plan?

What if Company A decides to do a Spin-off from Company B's plan, but since time has passed on their decision making and some employees of Company A were already paid out by the current service provider as part of the plan term? Can a Spin-off still be done?

Thank you!

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There has been some really bad advice happening here, and I hope you were NOT the one providing it.

When A adopted B's plan they already violated the 12 month rule.

If any of A's employees were paid out due to the acquisition of C and without a termination of B's plan and/or without actual termination from A, then there is an impermissible distribution.

If B's plan is not terminated, then a spin-off is indicated.

You already have a mess and you need to get an ERISA attorney involved.

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This mess was not created by my firm. A is trying to establish a new plan with us and I'm saying no way!

I agree that the successor plan rules could have been violated when they adopted B's plan if the termination date was after the change in ownership to create the control group.

Thank you!

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