5500 filing when plan takeover occurs

[Guest Jodi]

That's what I was hoping - one 5500 and one set of testing. And yes, the plan sponsor has changed. So I would put the new plan sponsor's EIN, etc. of page 1 of 5500, is that correct? Thanks.

[Guest Jodi]

When a company is bought out by another company, but the 401k stays in place, do two 5500 reports need to be filed? For example, a company with a 401k plan year end 6/30/98, is bought out on 4/1/98. The new company continues the 401k plan. Do two 5500s need to be filed - one for the old employer/sponsor for the year 7/1/97 to 3/31/98 and one for the new employer/sponsor for the year 4/1/98 to 6/30/98? Also should two sets of ADP/ACP testing be completed? Any assistance in this matter is greatly appreciated. Thank you.

[Guest robin s vatalaro]

I believe you file one 5500 for the year - noting on page one the plan sponsor has changed (has it?). Since the plan is continuing, it still gets its own 5500.

RE: ADP testing, consider that it appears all of the employees of the company that was bought, are now employees of the buying company. I believe you are generally required to consider ALL employees together of the same employer when ADP testing.

There may be some transitional rules during the year of company purchase, I don't know them off the top of my head.

Hope this helps. I would be curious to hear other's opinions - I have a plan in exactly this situation.

[Guest Laura A]

Yes - mark box B on the first page, then put the new sponsor/EIN on lines 1 and 2. The old sponsor's name/EIN should go on line 3a, and line 3c should be "Yes" (Change in sponsorship only). Hope that helps!

[Guest derek]

I know this isn't part of your question, but you should be aware of the many 411(d)(6) protected benefits that get lost in most mergers. Before taking any action with these plans, please consult your erisa attorney (by the way, i'm not one so i'm not making a sales pitch). It is just one of those areas that seems to get overlooked in mergers/acquisitions.

[Guest derek]

Also, someone mentioned the transition rules for mergers/acquisitions. I think the time period for doing combined testing (meaning considering the entire controlled group - including new entities) is by the end of the plan year following the year of the acquisition.

[This message has been edited by derek (edited 11-06-98).]