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Merger and Top Heavy


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Have Company A 100% owned by John.  Have Company B owned 100% by Bill.

In May 2018 Company A buys Company B and John is 100% owner and Bill is 0% owner

Each company had their own 401(k) plan in 2017, company B's plan is merged into company A's plan.  

Is Bill:

1)  a key employee in company A's plan based upon prior year ownership?

2) a former key employee in company A's plan?

3) or just a regular empoyee in company A's plan?

thanks

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  • 3 weeks later...

This may be key: Did company B merge into A (i.e., the transaction documents say they are merged), or were only B's assets transferred to A, and A was terminated? In a merger the surviving corporation takes on the obligations of the target, in an asset acquisition, it doesn't. So I'm thinking if a merger, your 1) would apply, if an asset sale, 3) would apply.

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