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A buys 80% of B - what happens to 401(k) plans?


M Norton
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Company A buys 80% of Company B, effective 10/1/2019; Company B's owner retains 20% ownership of B.

Both companies sponsor calendar year 401(k) plans, but B's employer contribution is not as generous as A.

After Company A buys 80% of B, they become a controlled group.

Can A and B continue to maintain separate 401(k) plans with different ER contributions?

Do they have to be tested together or can they be tested separately?

If they have to be tested together, when must that begin?

Thanks for any help!

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1 hour ago, M Norton said:

Thanks, Luke!

Does it matter that the discretionary ER contribution amounts are not the same for the two plans?

Not until after 2020. Then they can still maintain separate plans as long as they pass coverage. If they are large enough, they might consider QSLOB treatment. Or they could merge the plans.

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William C. Presson, ERPA, APA, QPA, QKA, APR
bill.presson@gmail.com
C 205.994.4070
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