Cross Tested PSP: Adding a subsidiary company

[Guest Troy S.]

Have a client currently sponsoring a cross tested plan for company A (future parent company of company B). Future company B will be a wholly owned subsidiary of company A, but will have different Federal tax ID #, and a separate payroll. Owners want to ensure all eligibility and benefits currently being provided (k feature, match, x-tested formula) continue to apply to new employees of company B. Plan document is a volume sumbitter doc. Is there a plan amendment that should be completed to reflect the new company as a covered group, or should they simply be treated as new employees of company A?

Thanks for any help!

[Belgarath]

Typically you would have them sign on as a participating employer. As far as service goes, (not vesting) there is some debate in the pension community. One side, which appears to be the majority (and I'm in this camp as well) is that as soon as Corporation B becomes part of the controlled group with A, then all service with B is counted for eligibility and vesting. A different view is that they only become employees as of the date the controlled group is formed, so their date of hire would be that date, not their original date of hire wiith Corporation B. You'll have to make your own judgements on this aspect - you can read 1.411(a)-(b)(3)(iv)(B) to arrive at the latter result, particularly if you read it fast. But read in conjunction with DOL reg 2530.210(d), I think you arrive at the former result instead. But as I said, their is some debate on this issue.

[Guest Troy S.]

Thanks for the response. What is the best method to have the new company added as a participating employer? Would that be through plan doc amendment?

[Belgarath]

I can't answer that - depends upon your document. Might require an amendment, might just be adding a new employer name and signature on the signature page, etc.