Transfer of Plan assets

[eilano]

Company B is owned 50% by JB and 50% by Company A. JB does not own any portion of company A. Company B is starting up a 401(k) plan and wants to move same participant balances from Company A's plan to Company B's plan. Participants will no longer participate in company A's plan. Supposedly company B was spun off of company A even though company A still owns 50%. Can company A's plan move assets to Company B's plan with or without paperwork from participants?

[Guest asire2002]

The spin-off of plan assets can generally occur without participant consent. You should follow the rules in 414(l). All balances, both vested and nonvested, should be transferred. My feeling is that before any such transfer, any unallocated amounts (415 suspense accounts, forfeitures, etc.) should be allocated first, but not everyone agrees with that interpretation. Generally, company A would adopt a resolution authorizing the transfer, and company B would adopt a resolution accepting the transfer, and sometimes there is a transfer agreement between A, B and their respective trustees. Since this is a transfer, any protected benefits must generally be preserved under B's plan.

Have you considered that A's plan, to the extent it currently includes employees of B, is likely a multiple employer plan?

Participants may need to complete new paperwork for the B plan. Look at their deferral election forms and investment election forms. Are they between the participant and A or specifically for A's plan? What investment options will be available under B's plan? To minimize exposure to B or its fiduciaries, participants should be notified of this change and asked to submit new investment forms and/or deferral forms, as needed.