COMPANY B PURCHASES ONLY THE ASSETS OF COMPANY A. COMPANY A HAS A 401K PLAN COMPANY B DOES NOT HAS A PLAN. WHAT HAPPENS TO CO. A PLAN"?

[Guest ROB VIDOVICH]

Company B purchases only the assets of Company A. Company B doese not have an existing 401k Plan but Company A does. The employees of Company A will be doing the same work for Company B. What does Company B do with Company A's 401k plan.

1) Can Company A's plan just stay in tact and Company B adopt the 401k plan??? How would this affect Form 5500 filing??? What TIN would be used and Company Name on form 5500 considering participants would be deferring under Company B's TIN???

2) Can Company B just terminate Company A's plan and create a new plan under Company B's TIN# and let Company A's participants rollover to Company B's plan or rollover to an IRA??

What is the best option for Company B on what to do with Company A's 401k plan????

Also how would any transaction affect the Annual Form 5500 filing for Company A's Plan???

[BeckyMiller]

If Company B bought the assets of Company A, they would have no duties or privileges with respect to the plan of Company A. Company A is a separate legal entity which presumably now holds cash or a note receivable from Company B. It is up to Company A to take appropriate action with respect to the plan.

Sometimes we see the plan transferred as part of the purchase. Company B affirmatively adopts the Company A plan as its own. But, that doesn't sound like what happened in your case. And it is not always the best approach.

In the interim, Company A will remain responsible for the Form 5500. You should make sure that no additional 401(k) withholdings are being taken from the wages of Company B employees.

Somebody needs to look at the documents to see what happened. As always - seek competent ERISA counsel.

[chris]

As already stated somewhat, the asset purchase agreement should address whether Company A keeps the 401(k) or whether Company B is going to agree to maintain it. My guess would be that Company B probably won't maintain it b/c it will take on whatever inherent liabilities there may be with respect to the prior operation of the plan. As already pointed out, Company B would probably want Company A to keep it and do whatever it wanted, i.e., terminate it, with it. Check the documents.