Successor Entity

[Randy Watson]

Assume a participant has a grandfathered benefit under a NQDC plan. Another entity purchases the assets of the service recipient and agrees to assume sponsorship of the plan. The purchase takes place in 2005. The participant retired and began receiving payments in late 2006.

Since we have a new service recipient this seems like a completely new NQDC to me, and since it is really a new plan it appears to be subject to 409A.

Does anyone see a way to preserve this grandfathered status even though we have a new service recipient?

[Steelerfan]

Curious as to why you think it's a new plan. How are the granfather rules dependent on who the service recipient or the plan sponsor is?

[Randy Watson]

Curious as to why you think it's a new plan. How are the granfather rules dependent on who the service recipient or the plan sponsor is?

This was an asset deal, so unlike a stock deal where there's no change in the service recipient we have a brand new party coming in agreeing to provide NQDC. Although the original plan was grandfathered, the purchaser, who had no previous connection or obligation with regard to the NQDC, comes in after the 12/31/04 and offers these benefits.

Seems like a brand new NQDC plan to me.

[Steelerfan]

Read the legislative history--409A is effective only with respect to amounts deferred after 12/31/04. I wouldn't go further than that. Curious what others think.