Amendment eliminating credit for service with successor

[Guest shelle]

Pursuant to an asset purchase agreement, seller agreed to amend its plan to provide that for purposes of the early retirement benefit (which requires 55/10), and the early retirement subsidy (if retire on or after 55) it will count service with the buyer. In the purchase agreement buyer agreed to pay for the incremental cost of counting such service. Buyer is now reneging on its promise to pay for these benefits and therefore seller wants to amend its plan so that it no longer will count service with the buyer. Is this permissible? I don't think it would work with respect to any transferred employee who has been receiving service credit since the time of the transaction and now has 10 years. Could it apply to someone who as of now does not have 10 years? Any argument for mistake of fact or ancillary benefits? Thanks!

[david rigby]

Several issues. For example,

- Has the plan been amended? If so, then an amendment in the opposite direction could be a problem.

- From your description, there appears to be a problem with the agreement between buyer and seller. This does not necessarily involve the plan.

Plan and plan sponsor need legal advice.

[Guest shelle]

Yes, the plan has been amended to include service with the buyer. When you say a problem you are referring to a 411(d)(6) problem, correct?

[david rigby]

Yes.

But don't forget about employee relations problems.

There may also be "contract" issues, hence my reference to competent legal advice.