M&A transaction -- Buyer's ESOP

[Guest Mr. Joseph]

Seller company is a financial services company and wants to sell its assets to Buyer. Buyer is a large company with an established ESOP in place. Seller is going to terminate its employees and they will go be hired by the Buyer. There are no roll over dollars, or continuation of any Plan that had been for the Seller's employees. But, Seller wants to look out for its employees and does not want its employees to start over with Buyer on a new vesting and participation schedule. Instead, Seller company wants its former employees to begin employment with Buyer and get immediate participation in the Buyer's ESOP and to be imediately and fully vested. Buyer had agreed to this, but now "says" it cannot do this.

I disagree. I think it is a little difficult for the Buyer, but that this can be done. It seems to me that Buyer can do this by merely amending its ESOP Plan to give the former employee's of Seller immediate participation and to fully credit them with past service with Seller so that each of the Seller's former employees can start out employemnt with the Buyer by fully participaitng and by being 100% vested in Buyer's Plan.

These employees are gonna be "rank and file" --- not hce's so there is no prohibited discrimination. Does anyone concur or differ with me???? Any bullet points of what is involved???

[stephen]

Buyer can do this by merely amending its ESOP Plan to give the former employee's of Seller immediate participation and to fully credit them with past service

Based on the information given I agree with your thoughts on the matter.

[BeckyMiller]

See IRC Reg. 1.401(a)(4)-11(d)(3) - I think this says you can do what you have suggested.