Plan continuation?

[Guest Moira]

An employer sponsored a small (2 participants) 401k plan. Her therapy practice did not succeed, and she closed down in mid-2005. In 2006 she will be opening a new practice, same corporation, same tax id number. The old employee no longer works for her. Is there any concern to her using the same plan? Need we terminate for any reason the old plan and start anew?

[Nate X]

I'm assuming she's keeping the same EIN because she is a Sole-Proprietor.

In this case, the successor plan rules apply. The two companies are considered to be in a control group (even though they didn't actually exist at the same time). I would simply change the plan sponsor's name on Form 5500 (if applicable) and have the have the new company as an adpting employer in the plan document.

[Guest Moira]

Thanks so much - I appreciate your help.

[Guest Boilerburm1]

Nate's comment is correct based on the assumption that she is a sole proprietor.

If she owned two different corporations that didn't exist at the same time, I don't believe there would be a controlled group.

As Derrin Watson says in his excellent book "Who's the Employer", "it is impossible for a corporation that has been liquidated to be part of a controlled group. It would be like marrying someone who died five years earlier."

[jpod]

Moira, from your post it appears that the employer is the same corporation; the owner merely shut down her practice for a while, and is now starting it up again. If those are the facts, and the corporation did not terminate the plan, then the plan still exists and is available for utilization as if nothing happened.

[BG5150]

Was the old plan officially terminated? Were the assets liquidated? Does that matter?

[Guest Moira]

The old plan was never terminated, assets remain in the plan. It is a professional corporation, yes she shut down in one location and is reopening in another.

Thanks for all your help!