Company Acquisition Question

[Guest amm19]

Company A has purchased 100% of Company B. Company A maintains a 401(k) Plan. Company B does not maintain any qualified plan nor have they ever sponsored a qualified plan.

The purchase agreement did not contain provisions of the entry by Company B employees into Company A's 401(k) plan. However, Company A has promised Company B employees entry as of 5/1/02.

As far as plan documentation goes, what are the appropriate action steps?

I dont think this will qualify as an adopting employer, since Company B is completely controlled by Company A so I think that the Years of Service and Eligibility provisions of the plan will need to be amended to reflect the change.

Would you all agree with this? Am I overlooking anything else?

Thank you.

[mbozek]

You need to review the terms of the purchase agreement with counsel to determine if any of the following questions are answreed:

1. is prior service with B counted as years of service with A for participation and vesting?

2. Do B employees participate immedately for salary reduction?

3. Do B employees automatically become eligible to participate under A's plan or does A's plan need to be amended to make B a participating employer?

4. Does B need to adopt a resolution to become a participating employer in A's Plan?

5. If any of questions 1-3 are not answered then A will have to determine what is an approprate answer.

After the above questions have been answered the plan may need to be amended to incorporate the terms of the purchase agreement regarding the addition of B's employees into A's Plan.

Also 401(k) enrollment forms must be provided before the eligibility date.