Mergers & Acquisitions

[Guest lschaab]

If company A (who maintains a noncalendar year cafe plan) purchases 100% of the stock of company B (who maintainsa a calendar year cafe plan), when are the control group tests to start? Can we allow company B's plan to run out the calendar year, allow elections for a short year and then formally merge the two together under A's plan? Would we test then or at the point of sale?

Any thoughts comments would be welcome.

[mbozek]

This may surprise you but like testing 401(k) plans after mergers of two corporations, there are no rules for testing 125 plans after a merger. IRS is preparing regs (but dont hold your breath). Right now the only rule is to do the right thing.

[Guest lschaab]

Testing the two plans as one would help the acquiring company pass day care, and would not adversely affect any employee, so I surmise that that is the 'right' thing to do?!? If I didn't test at the point of sale, my only other option would be when the plans are formally merged, correct?

[mbozek]

or at the end of the calendar year. I dont know what all the possibilities are since there are no rules.