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Found 2 results

  1. Company A and Company B are both corporations owned 100% by Fred so we obviously have a brother-sister controlled group. Both Company A and Company B sponsor 401(k) plans - both have 12/31 PYE, same HCE definition, and current plan year testing for ADP/ACP. Historically the Company B 401(k) plan has failed coverage testing so the plans have been aggregated to pass coverage and ADP/ACP. Fred sells 100% of his stock in Company B to his best friend Barney on December 1, 2021, so there is no longer a controlled group. Nothing else changes other than the stock ownership and there is no affiliated service group. 1. Are the employee populations of Company A and Company B required to be combined for coverage in 2021? 2. If they aren't required to be combined, can the plans be permissively aggregated for 2021 (and 2022 if desired)? I assume 1 is no and 2 is yes since the 410(b)(6) transition rule allows the parties to a stock acquisition to test their plans for coverage and nondiscrimination purposes as though the transaction did not occur, but I'm just not 100% confident in my thinking... or there was too much holiday cheer last week and my brain still isn't functioning properly.
  2. A plan sponsor was acquired via stock sale. They were told that terminating their plan before the deal closed was advisable to provide more freedom of choice to their plan participants (a distributable event allowing more distribution choices, rather than face a plan merger under the successor plan rules). The acquiring entity also did not want to take on the liabilities present in an active qualified plan with operational defects. I don't have any details on the purchase agreement between the 2 parties, unfortunately, but will guess that not much was stated regarding the retirement plan. So now we have a terminated plan that still has a number of steps to fully shut down, including current and future compliance testing, tax form filings, potential refunds, distributions, etc.. Question 1: Am I correct is thinking the acquiror has every right to insist that those tasks (and costs) be handled by the acquiree? Question 2: Does the acquiror somehow inherently own the liability for the acquired company's plan anyway, absent anything in the purchase agreement specifying that the plan trustees/officers of the acquired co. are personally responsible until the plan is shut down and beyond? Thanks for any comments and observations!
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