A company acquired another company 8/15/02. Is the parent company exempt from providing benefits to the acquired company for 18 months?

[Guest SandraC]

My company acquired another company on 8/15/02. The parent company has a 401(k) plan in place. They have amended the 401(k) plan to include the acquisition company effective 1/1/2004. Does the 18 month acquisition rule allow the parent company to exclude participation of the acquired company for the 2003 plan year.

Thanks for your help.

[E as in ERISA]

If the requirements are met, 410(b)(6)© potentially allows coverage to be treated as satisfied for the period ending 12/31/2003 -- and accordingly, the new sub would not have to be added to the plan until after that time in order to pass.

[david rigby]

No dispute with Katherine's response.; to clairfy, I beleive the requirement is to add the acquired group into the testing for coverage. It does not require, per se, that the acquired group be covered by the plan.

Also, the referenced code section does not say anything about an "18 month acquisition rule."