Same Desk Rule

[Guest DMK]

Has anyone given much thought to the "relief" from the same desk rule offered by EGTRRA's change in the 401(k) distribution event from a separation from service to a severance from employment? It seems that this change will help in asset sales where there is a change in employer, but not in stock sales. Rather, in cases where a subsidiary is being sold, one still has to rely on 401(k)(10) to make a distribution, which means that there remains a problem if the seller or buyer is a non-corporate entity such as an LLC or a partnership since 401(k)(10) is not available in those situations. In other stock sales where the entire company or group is being sold, Buyer has to deal with either continuing the Seller's 401(k) plan, merging it with Buyer's 401(k) Plan or possibly having the Seller terminate it before closing in order to allow distributions. Anyone with additional or contrary thoughts out there about the repeal of the same desk rule? Thanks.

[Guest earthy]

I have thought about it quite a bit as I have dealt a lot with 403(B) participants whose services are with non-stock corporations.

I hope the IRS publishes a comprehensive ruling and/or notice on this entire matter as it may impact many individual taxpayers down the road whose companies go through mergers or acquisitions.

This new rule will also need to be amended into many EE benefit retirement plans for EGTRRA purposes.

This rule will also sunset under EGTRRA in 2010 and can you imagine the confusion that would occur when practicioners have to go back to the same-desk principles.