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Send him a letter denying his claims review request for 100% vesting?

Unless Mrs. Smith can be hired to wind things down.

Sounds good to me. Speaking as a non-lawyer, I would think that just because someone's lawyer demands something does not put the burden on the recipient to either comply or to point to specific legislative or regulatory citations saying why it cannot be done. Just point to the plan provision that keeps the match from being 100% vested and tell them to go pound sand. The question is not "why can't you do it?" as much as "why should we?". Mere disgruntlement does not create a non-frivolous cause of action or otherwise compel plan sponsors to create exceptions.

If the purchase by B assumed sponsorship of A's SH plan, why not simply operate separately for the remainder of the year and use transition rules for coverage and NDT? Then merge plans at 1/1 with the surviving plan being the one with the provisions that aligns with the company's objectives. If B did not take on sponsorship then A's plan should be terminated.

They can... but a few things to keep in mind: 1) A start-up for a "few" employees is not really economical for many service providers. They should be prepared for "above average" costs; 2) Assets need to be held within the jurisdiction of U.S. District Courts. That generally means the situs of the trust is in the U.S. which generally means a U.S. based trustee; 3) Choice of plan sponsor might be of concern as well. The one's I've done had a "U.S." subsidiary (a corporation based in the U.S.) which employs the U.S. based employees. That makes it easy - make the U.S. sub the sponsor. If not (and just having an EIN doesn't mean they do), there are some interesting legal and fiduciary issues that may be impacted by Canadian law that the company should investigate with international counsel (one versed in both Canadian law and ERISA); finally, the plan should be drafted very carefully to ensure only the intended employees are included - especially if people bounce across the border occasionally.