Controlled group breakup on the horizon, can we spin off one group's members to a new plan to lower the 2006 beg of yr participant count so no 2006 audit is rqrd?

[Beltane]

Two controlled corporations sponsor a standardized DC plan which has a calender year. Stock transaction in early 2006 will eliminate controlled group status, so a spin off plan will be established.

Any feelings on doing the spinoff in the second half of 2005 to save the audit report attachment for the 2006 5500 return? If separarated before year end, both plans [identical otherwise] will have under 100 participants on 1/1/06.

My feeling is no, cart before the horse. Initially I thought there might be a 411(d)(6) problem for the period of time up to the stock transaction, but everything in the spin off plan will be identical. I don't anticipate any testing issues....

[Guest Boilerburm]

My feeling is yes. There is nothing that says that a single plan must stay a single plan, even if there was no controlled group situation. If I were a single employer, and had two factories with 99 participants in each, I could set up a separate plan for each location and avoid the audit requirement. What I need to be concerned with is passing 410(b) and 401(a)(4). As long as I can prove nondiscrimination, I can have two separate plans and avoid the audit requirement in each.