410(b)(6)(C) Transition Rules

[R. Butler]

A owns Company Z. Company Z has a Plan (calendar year).

B owns Company Y. Company Y has a Plan (calendar year). B is A's dad. A is over 21.

During 2002 B sells Company Y to A.

It seems to me that the transition rules give me a pass on the coverage testing issues in 2002 (and in 2003).

Am I understanding the transition rule correctly?

Thanks

[Mike Preston]

True, but only if "the coverage under such plan is not significantly changed during the transition period (other than by reaosn of the change in members of a group) ..... " 410(B)(6)©(i)(II)

[R. Butler]

Similar Situation

Company A a wholly owned subsidiary of Foreign Parent with no other US business.

In 12/02 Company A sold to another foreign parent. The new foreign parent does have US subsidiaries.

Based on my understanding (assuming no other coverage issues) I am O.K. in 2002 and 2003 under the transition rules. Anyone agree or disagree?

(With all these ownership changes I haven't been able to concentrate on my new DB career)

[E as in ERISA]

Be careful about relying on the transition rule if you have a standardized prototype (or any plan that by its terms covers all members of the controlled group). The wording of the plan may require that everyone be covered. Then the transition rule would be irrelevant.

[R. Butler]

In both cases the document automatically excludes those who became Employees in 401(B)(6)© transaction unless the employer specifically elects to include them.