Merger of two plans

[Guest terric]

The scenario that I have is as follows:

Two separate companies (A & B)- common ownership but no control group

Currently have two separate profit sharing plans

Company B will be adopting Company A's profit sharing plan as a multi-employer situation

Can Company B's plan merge into Company A's plan and have all assets transferred into Company A's plan or would Company B's plan have to terminate?

Thank you.

[Mike Preston]

It is not a multi-employer plan unless the benefits are subject to collective bargaining. I think you are talking about a multiple-employer plan, right?

Yes, they can merge.

Lots of i's to dot and t's to cross, but shouldn't be too bad.

[Guest terric]

Yes, that is right.

In merging the plans - is it as simple as a Board Resolution for each plan and transferring the assets or is there more to it than that?

[Mike Preston]

Lots more. How are the monies invested? If there are individually directed accounts, will there be any blackouts? BE VERY CAREFUL ABOUT SOX NOTICES. What do the financial institutions where the monies are invested have to say about all this? How will the earnings be calculated? Who are the Trustees? What do they say?

Any loans outstanding? How will they be administered before, during and after the transition?

Does Company A know that they are taking on the warts of Company B's plan? Any due diligence been done?

Any lawyers involved?

This stuff is so simple.

Yeah, right.

[Guest terric]

The assets are invested in the same investments, same investment advisors, both in pooled accounts etc. There are no oustanding loans under the plan, the plan documents are identical for eligibility, contribution, vesting, distributions, etc. As far as earnings allocations, I was planning on weighting the transfer depending on when it actually took place. No lawyers are involved.

What notifications need to be provided to the participants and is there a time frame in which the notices need to be provided - both plans are profit sharing plans - discretionary formulas?

Thank you very much for your advice Mike- it is appreciated!!!

[Mike Preston]

Actually seems like it might be a pretty simple transaction. If there are no due diligence issues then a simple merger seems like it will work just fine. Still have to deal with contributions for period before merger but within plan year.

Strangely, not too many notification issues involved when PS plans with pooled investments merge. Participants will be new to a plan and therefore due an SPD, that sort of stuff.