Participating employer relationship ends

[Guest Achilles]

A plan came to us with a participating employer. There were two companies owned by the same one owner.

7/24/2007 the owner notified us that effective 7/31/2007 he sold the company that was listed as a participating employer in the the plan document.

The one owner delayed in contacting us further as we asked for more details.

Today, the company that was sold still has participants deferring into the other company's plan.

When the sale of a participating employer happens, must the partic. employer have their own plan setup in time to have their deferrals go into this new plan? Or can they contiue to defer until their own plan is setup?

Deferrals made after the effective date of the sale, how does this affect the 2007 testing and 5500?

Any guidance or other things to consider is appreciated.

Thanks in advance.

[JanetM]

Unless the original plan was multiple employer plan, when the company was sold the employees no longer are eligible to defer. They don't meed the definition of eligible employee.

You will have to refund the deferrals made and the sold company will have to set up new plan.