Plan Termination?

[Guest Michael Anderson]

We have a company (A) that has sold nearly all of its assets to another company (B). Company A has not been sold - the stock is still in place and their is still at least one person 'employed'. Company A has a Safe Harbor 401(k) Plan as does Company B. Company B is hiring many of the employees that are laid off by Company A.

1. Is this a plan termination?

2. There is a 2% surrender fee from Company A's current plan. Can either Company A, Company B or the new investment firm pay the surrender fees? If so, do they have to pay for all the participants?

3. If this is a plan termination - where can I find literature on the correct way to file with the IRS and what needs to be given to the participants?

Thanks for your help!

[david rigby]

What do you want the answer to be?

Seriously, if you want B to sponsor the plan, then the attorney should get busy drafting the agreement that states B will assume the plan. Then B can merge plan A into plan B. If you don't want that to happen, then you are already there. Plan A will be probably be deemed terminated, although maybe not right away since there is still an employee (OK, sort of).

If the plan has any PS contributions that are not 100% vested, they are now (partial termination).

[mbozek]

The plan will not be deemed terminated as along as employer A remains in business with at least one participant. A ps plan is required to make substantial and recurring contributions. Under IRS terminaton guidelines the failure to make sutstantial contributions to a ps plan for 3 out of 5 years could be grounds to deem the plan terminated if there is a pattern of profits. The partial termination occurred when the emplyees were let go by A but the only consequence is that those ee become 100% vested.