mphs77

Which is why I said "So long as the Company passes a resolution, or a partnership agreement" that it is acceptable....

So long as the Company passes a resolution, or a partnership agreement, to contribute those individual amounts, it should be fine.....unless testing ruins it for you. it is not a reg issue, it is a Plan document issue and the document allows for it.

It is possible for each group to get the allocations you pose, so long as it passes testing. What does the Plan say about the allocation provided for each group?

I would think that may depend upon the state involved in the matter......

What do you mean "paid all distributions back"? Does the Plan have a provision that allows for the return of a distribution?

I'll never get that 5 minutes of my life back...... Curse you!

Are there any family relationships between the Shareholders?

Don't automatically think the spouses each "own" the other spouse's stock. There is an exception under 1563(e)(5) that may apply.

Is there a Power of Attorney in place giving the CPA said power?

If Plan A still has the participant with 100% vesting (if they have not taken a distribution as you say), I believe they would be 100% vested in Plan B's account.

After the merger will there be only one Plan? If so, which one? If there are still two Plans, will Company B's Plan count vesting service from Company A?

You said "they received", who is they? The Employer, the Plan or the Trust?

I agree that it is probably a 3 in 5 year interpretation that has gone amiss. But I wonder if they are not losing themselves in the traditional problem of contribution versus allocation. The Board may authorize a contribution amount but the Plan describes the allocation.

How many employees are there? Perhaps the one termination should be a partial plan termination and thus no forfeitures might occur?

which is why per William Shakespeare... "First thing we do is kill all the lawyers"

On item 4. you learned in 2015 that participant compensation was 275,000 for which year(s)?

A valid legal basis? Maybe because the July 2 payroll was for services performed through June 27th which is before their entry date?

Since only people who own a portion of both Company 1 and 2 are considered for the 80% common ownership test, it would only Individuals A and B and their ownership are considered. Remember Individual C owns none of Company 1. Thus as they own 100% of Company 1 and only 75% of Company 2, it would fail the 80% common ownership threshold and not be a controlled group.

Are Individuals A, B & C related to each other in any way?

I think so as it seems to be like the example in the EOB, Chapter 11, Section XI, item .b.1)b)

rcline46 - true most plans require loans to be repaid upon termination, but not all plans require this so it is something that should be investigated.

If Company A is purchasing the assets of Company B, then won't Company B still exist? And if that is true, Company B could still sponsor their Plan which would allow the loans to exist it it's Trust.

Key EES or HCEs? They may be Key due to other standards such as an officer of the S-Corp with sufficient compensation. HCEs I doubt as that would be double attribution, would it not? First the stock owned by the Family Trust is attributed to the beneficiary of the Trust (the children) and it would take a second attribution to go to the spouse of the children.

1. I agree 2. Many firms look at an "accrual basis" reconciliation of the Plan's assets to be a bit of a one way street. Any money owed to the trust will be shown as a receivable but any fees or distribution in process at the end of the year will not be shown as a payable. It really depends on if you want to show the fee as a payable. My personal belief is that it should be a payable and thus reflected on the 5500.

Seems to me that this situation is a lawsuit (or several) waiting to happen. John Doe has a balance (after the most recent valuation date) of $0, because after all even a lot of shares times $0 per share yields $0. And as $0 is less than $5,000......the Plan could say that John has been paid his distribution of $0 and immediately re-allocate his now repurchased shares to the remaining participants. Do this enough times and only the owners may be left with any shares. Want to bet the price becomes something other than $0 then?