employee/plan merger juggernaut

[Guest basilb]

We have two employers, let's call them Employer 1 and Employer 2, sponsoring plans under the same multiple employer 401(k) plan.

The employees of Employer 1 are being transferred to employment with Employer 2. Employer 1 is merging its 401(k) plan with Employer 2's plan at the same time as the employment transfer. All of the employees -- except for a couple -- are working in the same place, doing the same thing, but their official employer is changing, and their plan accounts are merging with Employer 2's plan accounts.

The question is - what do we do with the accounts of the couple of employees that are staying with Employer 1? The Employer 1 plan doesn't exist any more! These employees can't be participants in the multiple employer plan anymore, because Employer 1 isn't related to Employer 2; these employees didn't sever from service though - their plan left them. They're still with the same employer. The plan didn't even terminate - it merged. Can they be paid out? The plan provisions don't really provide any guidance for this situation. In the meantime, their accounts have been merged into Employer 2's plan.

Thanks!!

[QDROphile]

I don't know who "we" is in your message, but if "we" is left with a multiple employer 401(k) plan when this transaction is completed, "we" needs to look at the April 28-29 2005 posts in the securities law forum.

[WDIK]

Not to oversimplify the complexities of multiple employer plans, but I don't see how the "couple of employees" can be considered active participants in a plan their employer no longer "sponsors", and I would apply the appropriate plan provisions regarding distributions to participants of their status.