Severance from Employment

[Randy Watson]

Company A sponsors a 401(k) plan. On January 1 most of Company A's assets are sold to Company B and former employees of Company A begin working for Company B (same job, same location etc..). Company B adopts Company A's 401(k) plan and the employees of Company B begin participating in Company A's plan again. If Company B eventually terminates the participation agreement with Company A's 401(k) will Company B's employees be able to take a distribution from the plan on the grounds that they had a separation from service with Company A? Keep in mind that they are still working for Company B. Would the distribution be limited to the amount they contributed as Company A employees since they are still working for Company B?