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Assumption of existing 125 plan


Belgarath
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If a corporation (A) changes name, entity type, and gets a new EIN for the new corporation (B), is there any reason why (B) can't assume the assets/liabilities of the existing corporation (A) Section 125 plan, similar to what often occurs in the qualified plan world? I don't see why not, although Section 125 and the 125 regs don't appear to address this. But there is some info in RR 2002-32.  With all the mergers/transactions going on, I assume this happens all the time?

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I'm not sure what assets or liabilities that a Section 125 Plan would have.  All a section 125 plan does is provide participants with the ability to pay their share of the cost of coverage for certain benefits on a pre-tax basis.

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1 hour ago, Belgarath said:

With all the mergers/transactions going on, I assume this happens all the time?

Belgarath, your assumption would be correct. In an actual asset acquisition there could be some corporate tax issues in that the buyer is assuming a liability of the seller and whether that should be capitalized, but the number is typically small and my guess is the issue is usually overlooked.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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Assuming the new entity is within the original controlled group, I would just amend the Section 125 cafeteria plan doc to include the new plan sponsor information going forward.

If the new entity is from outside the original controlled group, I would just follow he standard M&A approach.

Here's a slide summary:

Newfront Office Hours Webinar: M&A for H&W Employee Benefit Plans

image.png.d2b9770fd7dc9d7c58cefb541f6443a7.png

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