merger situation

[Kimberly S]

An employer who terminates a 401(k) plan is not eligible to establish a new one for 12 months. Before the 12 months are over, employer A is acquired by employer B, creating a controlled group. Employer B would like to add employer A to its 401(k) plan as a participating employer. Must they wait until 12 months after the termination of employer A's plan to do that?

Would the answer change if employer A "froze" its plan rather than terminating it?

Related question: does freezing the plan trigger 100% vesting since a profit sharing plan without substantial and ongoing contributions is deemed to be terminated?

[JanetM]

My take is that if Employer B is plan sponsor and Employer A is going to be allowed to participating employer, then Employer A is not starting a new plan and will be allowed to join Bs plan. Answer would be the same whether you froze or terminated.

Second part - first you said 401K not you refer to employer PS contributions. Imagine a 401k plan that is employee contributions only (we used to offer these to union locations who have DB plans until we killed off all the DB plans). Based on your logic the plan could never have even started.

[Kimberly S]

Janet, your second paragraph lost me. Why do you say the plan could never have started?

My original question was based on the premise that 401(k) plans are a specific type of profit sharing plan. I have read in multiple reference materials that freezing a profit sharing plan effectively terminates it because of the requirement for substantial and ongoing contributions. If all 401(k) plans are, by definition, profit sharing plans, that requirement would also apply to 401(k) plans. Hence my question.

[JanetM]

To say a 401k PS plan must have substantial ongoing contributions would prohibit a deferral only plan since there are no ER contributions. You can have a 401k plan that has no PS, match or any type of ER contribution.