Changing Single Employer Plan to Multiple Employer Plan

[Guest JackM]

Our client (Parent) sponsors a single employer 401(k) plan covering several control group members. Parent company is selling a subsidiary (which will become an unrelated employer to parent) in October but desires to continue covering the subsidiary in the plan post-sale. Parent is converting the plan to a multiple employer plan as of 10/17/05 to accomplish this.

QUESTION: How will ADP testing be performed for parent and new unrelated company for 2005? Is the plan tested as a single employer plan through 10/17 and then tested again as a multiple employer plan as of 10/17 through 12/31? Or, is the plan tested as a single employer plan through 12/31 treating the employees of the unrelated company as no longer eligible as of 10/17 (and then testing the unrelated company separately from 10/17 through 12/31)? Or none of the above?

[QDROphile]

If you want to ask a different question that may moot your questions (i) go to the Securities Law forum on this board and check out the question about registration requirements for multiple employer plans and (ii) ask if the plan sponsor is aware of the issue and how to comply with the law. A public company can probably comply with the law without too much trouble. Beware. You can't tell if you will be a hero or a goat for bringing it up.

[Kirk Maldonado]

While I don't disagree with what QDROphile stated, if the client thinks you are a goat because you brought up an issue that nobody else had spotted, you are better off without that client.