Termination or merger of acquired subsidiary plans

[Guest TCP]

All of the pre-acquisition subsidiaries of a bank holding company are covered under one discretionary profit sharing plan. The Holding company has acquired a new subsidiary bank that has two plans: (1) money purchase pension plan and (2) 401(k) Plan.

The Holding company desires that all employees of all subsidiaries be covered under the existing discretionary profit sharing plan. The Holding company would also like to establish a 401(k) plan. The current Holding company profit sharing plan's assets are held by a trust. The assets of the acquired bank are all held in insurance contracts.

Even though there is a money purchase plan in the acquired bank, is it corect that the assets of both plans could be (1) merged into the discretionary profit sharing plan or (2) merged into the discretionary profit sharing plan and/or the new 401(k) plan ?

If the insurance contracts have termination fees, could that be mitigated by freezing the plan until those charges are no longer significant, while allowing the acquired banks employees to participate in the holding companies profit sharing and 401(k) plan or would you go ahead and merge while holding the insurance contracts as a seperate assets class until termination fees have lapsed ?

[Guest rsm]

Please see IRS Revenue Ruling 2002-42 (and cites within that Ruling) in regards to the proposed plan merger question.

In addition, the corporate merger and acquisition documents often provide guidance as to how the target's benefit plans will be maintained or amended, i.e., full vesting, freezing, merging, etc.