Controlled Group - 410(b) transitional rule

[dmb]

The transitional rule of 410(b)(6)© refers to certain acquisitions or dispositions of a trade or business. Would the formation (as opposed to an acquistion) of new business be included in that classification??? Thanks.

[E as in ERISA]

Since no one else is answering, I'll take a stab and say that I would assume that the answer to that would be "no." I haven't looked at anything. But I don't recall having seen anything along those lines when I've looked at the issue before. And the reason that I would guess "no" is the fact that in acquisitions or dispositions you often have existing employees who are covered under existing plans and have existing benefits. And the unraveling of those arrangements can often take some time. For example, you might often have a blackout when you are going to merge a target's plan in or spin out a plan. It's often much easier to add new employees into an existing plan -- when you don't have to worry about any old plans and benefits. And acquisitions and dispositions can also often be complicated by lots of secrecy from a corporate standpoint that prevents HR from knowing about a transaction until the last minute.

[dmb]

Thanks for the response. Let me ask this then...a plan was effective 1/1/03. At that time there was one employer. As of 5/1/03 the employer formed a new entity which resulted in a controlled group. After realizing the situation, the ownership was changed so that the controlled group did not exist as of sometime in October, 2003. If the employees of the new entity all had dates of hire of no earlier than 5/1/03 could statutory exclusions be used to avoid covering the employees of the new entity?? By the way I am told that the plan does not have eligibility requirements. Thanks again.