Jump to content

Stock transaction (sale?)


Scuba 401
 Share

Recommended Posts

Employer A merges with employer B. Employer B gives stock in B to A in exchange for all of the stock in A.  (i would say this is treated like a stock sale).  Employer A never terminated its plan. A wants to terminate its plan so the owner can do a rollover. Typically since B now owns the stock in A it would decide what to do with A’s Plan. However, our plan has a provision which says that if the employer is acquired and the new employer doesn’t continue to the plan then the plan terminates automatically.  B would eventually want to start a new plan (maybe next year) but they haven’t done so yet leaving A’s plan alone for the moment. 

 

Can the owners of A rely on that provision in their plan to pay their plan out rather than be forced to merge it with B’s future Plan or relinquish control of its plan to B? 

Link to comment
Share on other sites

8 minutes ago, jpod said:
  • if this was a merger A doesn't exist anymore.  I would have to see the precise language you mentioned, in context, to evaluate it.

The Plan
will terminate upon the first to occur of the following:
(1) Specified date. The Effective Date of termination
specified by proper Employer action; or
(2) Employer no longer exists. The Effective Date of
dissolution or merger of the Employer, unless a successor makes
provision to continue the Plan, in which event the successor
must substitute itself as the Employer under this Plan.

Link to comment
Share on other sites

Meh.  I suppose this language means the plan was terminated as of the closing date of the transaction, but for purposes of the 401k rule prohibiting successive 401k plans I am not sure that works.  Beyond my energy level at the moment to think about this further.  

Link to comment
Share on other sites

I agree with jpod.  If the language cited is really operative (we don't know what B did - and even if they haven't become the defined employer - by assuming responsibility they may have become the effective plan sponsor.

In any event, the plan would not terminate UNTIL the merger is complete, which means B is the "sponsor" for successor plan rules.  The language should have said "immediately before" merger (and I express no opinion as to whether that would actually be effective either).

Link to comment
Share on other sites

Back to square one for me.  What was described in the original post was not a merger.  B purchased A and A is a wholly owned subsidiary of B. Who or whatever owned A before all this started now owns some part of B.  If that isn't the case then the description of events needs to change.

Link to comment
Share on other sites

I interpreted the original post as describing, in a non-technical fashion, B issuing stock to the shareholders of A as the merger consideration.  But, Mike Preston may be correct.  

Link to comment
Share on other sites

so

19 hours ago, jpod said:

A got stock?  Or, A's shareholders got stock?

A's sole shareholder got stock in B. sorry about that.  my concern is that in a stock sale the participant isn't considered to have a severance of employment and hence can't get a distribution. but in this case my document looks like they have a termination. can they take a full distribution in light of the document?

Link to comment
Share on other sites

i hate to be a pain in the rear on this, but this is really technical legal stuff that has to do with the structure of the transaction, as well as the language of the Plan.  Someone needs to evaluate the transaction paperwork to identify what really happened in the transaction and then determine how the plan is affected.  This should not be determined through a discussion peppered with assumptions.  Just sayin' ....

  • Like 2
Link to comment
Share on other sites

Ilene, you could NEVER be a pain, in the rear or otherwise. I think we sometimes get swept up in a conversation because we rely on the general disclaimer applicable to this bulletin board that everything posted is assumed to be directed at a pension professional who knows when to call in the cavalry. [I hear your whole office raising their bugels as I type this.]

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...