Simple Plan and controlled group

[eilano]

Company A, B and C were merged into a controlled group in 2003. A, B and C all have Simples. Company D has 401k plan. Do we have any controlled group issues regarding the Simple plans? Can we leave them as is until 1/1/04 when all employees will participate in Company D 401k plan?

[Gary Lesser]

More information or clarification is needed. Is company D part of the controlled group? Do A, B, and C each have separate Simple IRAs or one Simple IRA adopted by all three entities? What was the relationship of A, B, C, and D before 2003? Does any individual (directly or indirectly) own more than 50 percent of any of the entities? What type of controlled group is this (Brother-Sister, Parent Sub?) and explain how they became controlled?

The following, from IRC 408(p)(10), may be helpfull.

(10) Special rules for acquisitions, dispositions, and similar transactions--

(A) In general--An employer which fails to meet any applicable requirement by reason of an acquisition, disposition, or similar transaction shall not be treated as failing to meet such requirement during the transition period if--

(i) the employer satisfies requirements similar to the requirements of section 410(b)(6)©(i)(II); and

(ii) the qualified salary reduction arrangement maintained by the employer would satisfy the requirements of this subsection after the transaction if the employer which maintained the arrangement before the transaction had remained a separate employer.

(B) Applicable requirement--For purposes of this paragraph, the term "applicable requirement" means--

(i) the requirement under paragraph (2)(A)(i) that an employer be an eligible employer;

(ii) the requirement under paragraph (2)(D) that an arrangement be the only plan of an employer; and

(iii) the participation requirements under paragraph (4).

[C] Transition period--For purposes of this paragraph, the term "transition period" means the period beginning on the date of any transaction described in subparagraph (A) and ending on the last day of the second calendar year following the calendar year in which such transaction occurs.