Who is the Plan Sponsor of a Terminated Plan?

[Dawn Hafner]

If this was an asset sale then Company B still exists, unless it has also been disolved. Company B even as a shell company is still the plan sponsor. Company B is still the plan sponsor for all periods of time that the plan of Company B is in existence.

Have they looked at the "same desk rule" implications relating to employees that work for Company A in their same capacity as under Company B?

[Guest RMV]

Company A buys Company B in an assets acquisition. Company B has a 401(k) Plan that is terminated in the Purchase Agreement, effective with the sell of Company B to Company A. Company B started the 401(k) Plan, Aug. 97 and terminated Feb.99. All officers of Company B were not employed with Company A after the acquisition. Company B's 401(k) Plan had an outside Trustee. Company A also has a 401(k) Plan and did accept direct rollovers from Company B's 401(k) Plan if the participant so elected and employed with Company A. No final D-letter was filed for Company B.

For the 97/98 Form 5500 filing who is the Plan Sponsor? For the final 99 filing who is the Plan Sponsor? If there are no officers' left, is Company A obligated to be the Plan Sponsor? For all years, 97/98/99? What is Company A's obligation? What roll does the Trustee take and their obligation?

Thanks in advance for anyone's input!

[pjkoehler]

Sounds like Company A wanted no part of Company B's plan. That's an unusual lack of consideration by an employer for its new employees. Then Company B terminates the plan and doesn't request a determination letter before apparently distributing all the assets. I guess the fiduciaries of Company B plan don't mind flying by the seats of their pants. Wonder what Company A discovered about the plan during the transaction's due diligence phase?

[Guest Beth N]

PJK - Actually, I find it more common that not that a buyer will require seller to terminate its plans effective with closing. This is not lack of concern for the transferred employees, since they are usually put in buyer's plan(s) with credit for service to seller.

I also would like to explore your comment about Company B fiduciaries "flying by the seats of their pants" by not obtaining a determination letter. Again, I see lots of companies that decide a determination letter on termination isn't worth it. Buyers will accept rollovers without a determination letter (recent guidance from IRS says this is OK - just need some assurance that plan was in compliance, and this can be obtained through reps & warranties in the purchase agreement). And, if there were problems with the plan, chances are they were operational errors that are not likely to be discovered in the determination letter process. I'd be interested in arguments in FAVOR of getting a d-ltr, when faced with these circumstances.