new company, old tax id#

[MR]

lets say you have two medical groups, each with a 401(k) plan, that join forces and form a new company. the intent is to terminate the plans of the "old" companies (merging would be messy) and start a new one for the new company. the catch is that the new company has the same tax id# as one of the "old" companies. (not sure why they did that). So, they are terminating a 401(k) plan of an employer with the same tax id# as the employer for which a new plan is being established. if it was the same employer, they can't start a new 401(k) within 12 months of the termination of an old plan, but its not the same employer. the question is - will the DOL or IRS object to this?

[namealreadyinuse]

Tax ID is not the determining factor. The key is the percentage of particpants from the old plan in the new plan. The IRS/DOL doesn't care if you terminate, you just can distribute. You will end up doing a trust to trust transfer/merger unless you wait.

[JanetM]

Read up on sucessor plan rules to see if you will able to terminate & distribute the old plans. You may just end up merging the two into a newly formed plans with old EIN and 002 as plan number. (that is assuming that the current plan is 001).

[MR]

merging is what they want to avoid. the plan attorney is comfortable that they can terminate and distribute, but is now worried about the tax id issue.

[namealreadyinuse]

Tax ID is not the determining factor. If plan attorney is comfortable that the new entity is not in the controlled group of the sponsor, they should not be worried.

[Guest mjb]

Making the determinaton that the distribution can be made is what the plan attorney is paid to do based on the application of the 401k rules. No one on this board can provide an answer to his question.

[GBurns]

I do not know anything about this from a 401(k) reporting etc angle, but I cannot see the IRS allowing an entity to use a Tax ID# that belongs to a different entity. I shudder at the complications that it could cause with other reporting such as 940, 941, W2 and W3. I wonder why there would not be similar problems with reporting 401(k) items.

After all, the entities are legally different with different state corporate IDs, different articles, different charter, different state Sales& Use tax # etc. The entities exist because of state law and the state law says that they are different entities. If the state did not allow them to exist, Would they be able to have a FEIN etc and could they have a 401(k) any at all?

[Guest Pensions in Paradise]

I agree with GBurns. If the "new" company is indeed a completely new legal entity, it cannot continue to use the FEIN of the "old" company. For those who feel differently, can you please provide a cite which states that a new legal entity can assume the FEIN of a completely different entity. If no one can provide such a cite, then I would make the argument that you cannot start a new 401(k) since it would be a successor plan.