Participating Employer wants to start own plan

[Guest Dee Kratz]

I have a plan which had two companies of a control group on one plan document. Company A is being sold and the Company B wants to start their own plan. What action is needed for Company B to get out of A's plan as a participating employer.

Also, will Company B have to wait until the sale is final for Company A in order to start their own plan

[E as in ERISA]

It depends on what A's plan says about who is the employer and who are participating/adopting employers (if it only allows companies in the controlled group to be participating/adopting employers, then at the date when A is sold it is possible that B is no longer allowed to be in the plan).

The bigger issue is usually what happens to the benefits of B's employees in A's plan. There is frequently a spinoff of B's portion of the plan effective as of the transaction date.

Alternatively, they could start a new plan at any time. But then there are issues about testing the plans together, B's employees getting distributions from A's plan, etc., etc.