Buyer with 401(k) Acquiring Company with SIMPLE

[Guest jhall]

The following question was posted under the SEP and SIMPLE board some time back but there has not been any response and I find myself with the same question. Was just wondering if somebody more used to dealing with 401(k)s in mergers and acquisition situations may have run into this issue and how to handle. Many thanks.

Buyer maintains a 401(k). In April of 2008, it will acquire Seller, the sponsor of a Simple IRA. I've read 408(p)(10) and understand (I think) about the transition period permitted with respect to the Simple IRA. I've also seen some discussion about the fact that Simple IRAs must generally be maintained for a full year. But does that rule still obtain in an M&A setting? Would the Simple really have to be maintained through year-end 2008 on side-by-side with Buyer's 401(k)? If the Simple IRA were a 401(k), it could be terminated on the eve of closing, so that Buyer could get on with life and have all its employees in the same plan immediately. Why should the result be different with a Simple IRA? And if Buyer does have to maintain the Simple IRA through year-end 2008, how does that impact its 401(k) testing??

Would love it if anyone wanted to share their thoughts about most common way of handling this situation. I need to know how this story ends!

[QDROphile]

The first question is whether it is an equity or asset acquisition.

[401 Chaos]

I've struggled with this issue as well. My particular transaction was structured as a statutory merger / stock deal so that Buyer will become legal successor to the seller.

[Guest jhall]

The first question is whether it is an equity or asset acquisition.

stock / equity deal

[QDROphile]

I am not aware of any authority that would excuse Seller (defined as the company that is acquired) from running the SIMPLE out for the remainder of the year.

[Appleby]

Discussion continued here

Termination of Simple IRA -- How does story end?