Terminated Company/Open Plan

[Guest ResearchGirl]

A family-owned business with a Safe Harbor 401(k) just sold the business. All the employees now work for the Buyer. The owners (siblings) want to allow the participants the opportunity to roll their money into the new employer's plan but don't want to close the old plan. They would like to keep the old plan for their accounts (5 employees with 80% of the assets). Is this allowable?

[JanetM]

Probaply not, depends on how the company was structured. The plan has to have a sponsor - sole prop, corporation, partnership............... Is there some sort of entity left? If there was a corporation that sold assets but corp entity has not been disolved then you still have a sponsor. Sole propietor who sold assets but still has something to report on schedule C would still be able to sponsor plan.

[Guest Pensions in Paradise]

Just out of curiosity, why do the siblings want to keep the plan in place? Do they have loans or obscure investments? The reason I ask is that it would seem to be easier and cheaper for them to just roll their money into IRAs. If they do keep the plan (assuming there's a valid plan sponsor) they will have to constantly update the plan for changes in law and continue to file Form 5500.