Asset Sale & Plan to Plan Transfer

[Guest padmin]

Company A aquires the assets of Company B ( both sponsor 401k plans). 2/3 of the company B ees will

be re-employed by Company A. Can a direct transfer from B's plan to A be required by company A for the reemployed participants? Isn't this a severance of employment?. Any assistance appreciated

[jpod]

This issue comes up quite frequently in connection with asset acquisitions. If this is what A and B have agreed to do, the lawyers should draft an agreement whereby the accounts of the employees in question will be spun-off and transferred to the acquiror's plan effective upon the closing of the acquisition transaction, with the money allocated to those account balances to be transferred as soon as practicable thereafter. The theory, which arguably has some holes in it but is used all the time in asset acquisitions, is that there is no "severance from employment" if the employees' account balances are part of their new employer's plan immediately upon their employment by the new employer.