Terminating PEO Plan & Successor Plan rule

[Guest jim williams]

As a TPA for a terminating 401(k) Plan sponsored by a PEO, my question addresses the successor plan rule. If an employer who participated in the PEO's 401(k) plan decides to engage the services of another PEO who also maintains a 401(k) plan, would the 401(k) plan of the new PEO be considered a successor plan for distribution purposes?

[alanm]

If it were a multiple employer plan being terminated, I think the successor plan rule would apply to the adopting employer. In that case, the adopting employer should not allow distributions but direct a plan to plan transfer to the new PEO plan.