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Showing results for tags 'plan merger'.
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Facts: Company A, owned 100% by Adam has a 401k plan Company B, owned 100% by Bob has a 401k plan Neither company are currently related in any way. They are going to form Company C (33% owners each with a third unrelated owner) starting July 1, 2022. All of Company A clients and employees will move to Company C 95% of clients and employees of Company B will move to Company C. The owner of Company B will be on payroll and Company B & C. The idea is to have Company C take over as plan sponsor of Company A. The question is: 1. Can company B retain their 401k plan and not be related to Company C? The owner would like to keep his assets where they are while all of the employees of B transition to C would roll their money over. 2. Or should Company B terminate 6/30/22 to avoid issues. 3. For Testing purposes, how should this be handled? 1/1-6/30 for A, 1/1-6/30 for B and 7/1-12/31 for C? C do 1/1-12/31 for A employees and 7/1-12/31 for B? any help would be great.
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Does anyone know what the relevant comparison is for applying the 5% rule to the merger of defined benefit plans in the current year? Under the regulations, a merger has a "material effect" if it results or is projected to result in an increase or decrease of at least 5% in the value of assets or liabilities form the valuation date of the notice year. I expect that most mergers would increase 5% of the value of both the assets and liabilities, and therefore require an explanation. But where the plan's funding level is not changed before and after the merger (for example, the merger is between two similarly funded plans), is an explanation still required?
