corporate acquisition - employee working for one participating in the other plan

[k man]

As a result of a corporate acquisition (asset sale i believe), employees temporarily (two or three pay periods) will be working for the new entity (A) (the acquiring company) but the acquiring company will be sending the employee deferral contributions to the acquired company's plan (Plan B). They plan on eventually merging the plans. Is this ok in your view?

[QDROphile]

If it is OK to have a multiple employer plan, and the terms of the plan are not violated, yes. But you mentioned deferrals. Multiple employer plans with elective deferrals have securities law problems. Still, for a few weeks, I doubt that anyone will be taken to task. The end game will have fewer options because of the post acquisition participation in contributions.

[Guest KAL]

As a result of a corporate acquisition (asset sale i believe), employees temporarily (two or three pay periods) will be working for the new entity (A) (the acquiring company) but the acquiring company will be sending the employee deferral contributions to the acquired company's plan (Plan B). They plan on eventually merging the plans. Is this ok in your view?

Hello,

What does it state in the agreement about continuation of deferrals in the employee's former plan? If you have not merged your payrolls yet, and the employees remain on the seller's payroll, the 401k deduction deferrals may be discontinued based on the sale and the understanding or communication to your provider.

You could have the prior 401k provider work with the seller's payroll and create a file to send to your 401k provider to start them in your plan. A lot of prep work has to be done to move them to your provider with out your payroll being converted, but it can be done as I have done this before.