Company Spin-off

[Guest Jimmy B]

Here is my situation:

Company A is owned 50/50 by two doctors. July 2001, they split with Dr. 1 remaining in the exsisting company and Dr. 2 forming a new company and taking half the employees with him. Dr. 2 received his max contribution of $35,000 under Company A's 401(k) PS and MPP Plans.

Two questions:

Do the employees now employed with Dr. 2 under Company B receive new 415 limits for their Company 2 comp?

Must the employees now employed by Dr. 2 be given the opportunity to withdraw their money from the MPP and 401(k) Plans from Company A, or can that money automatically be transfered to new 401(k) and MPP Plans under Company B?

[Guest b2kates]

you do not state what the plan limitation year is. Assuming calendar year, the short year would cause the 415 limit to be prorated. This would reduce what could be contributed on behalf of the leaving doc.

No there is not requirement that the employees be permited to withdraw their account balances. The split up of the plan can be accomplished as part of the corporate spin off.