Who's the sponsor?

[Guest Kevin1]

My client AAA, Inc. is having its stock purchased by BBB, Inc. a Delaware corp and CCC, Ltd (BBB's parent company) which is an Austrailian company. They want the plan to remain intact and to have it cover only the employees of AAA. In the agreement BBB, Inc. is specified as the "Buyer".

Who is going to be the employer? Will AAA continue or because BBB bought all the stock is it the employer? BBB is only a small part of CCC, so it controlls both BBB and AAA.

There needs to be a resolution prepared to exclude all non AAA employees etc. Whose reso?

[Kimberly S]

Will AAA, Inc. be dissolved, or continue to operate as a susidiary of the others?

[J2D2]

I'd also amend the AAA plan to clearly exclude the non-AAA employees and not rely on a resolution alone. To follow on Kim's question, the entity that must adopt the amendment (AAA, BBB or CCC) will depend upon whether AAA remains as a separate entity and the terms of the plan document.

[Guest Kevin1]

AAA will continue intact. Plan will be amended to exclude non AAA employees. I guess I'm confused on exactly who the employer is form plan purposes. Seems that AAA remains in that capacity but BBB owns them outright and in turn is owned outright by CCC.

Thanks.

[Mike Preston]

See 410(b)(6)©. It gives you a transition period as long as the provisions of the plan don't change. Basically, AAA continues on as it has until the end of the year following the year during which AAA became a part of BBB. After the end of the transition period, pretend you are taking over a plan that has always been sponsored by a subsidiary (AAA) of another company (BBB) and proceed accordingly.

Note that the 410(b)(6)© exception does not extend to anything other than 410(b). Hence, issues that are resolved with direct reference to 401(a)(4) may need to be dealt with before the end of the transition period.