Asset sale - maintain 401k plan short term

[Guest Kberly]

Aquisition Sub (A) purchasing substantially all assets of SellerCo. (B). If (1) due diligence, compliance, determination letter, reps, warranties and indemnity all there re: qualification, and (2) no restrictions in plan document, then from an ERISA and legal standpoint, can A maintain B's existing 401k plan in A's name with A's EIN in the short term (A would like to do this), and hold off formal transfer of 401k until 6 mos. post-sale after B has had time to review its many options?

[masteff]

Is the question: can A continue to operate B's plan for B's employees after the asset acqusition? Sure, it's been done before. Have to be careful about definitions of eligible employees in both A's and B's plans. I believe ours said something like "not eligible in this plan if covered by another plan of the Company such as the B plan". Oh, and be careful about EE's or execs trying to game the system by saying "this employee is just on loan to the parent company, so still gets B benefit"; if the EE is transferred to A from B, then the EE gets put into the A plan.

Just to take your case to the extreme... we had scenario where mgmt was uncertain about reselling B in near term so B employees were maintained in B's plan for over 8 years. Wasn't until that location joined same union as other locations that they finally joined the A-union plan.

Oh, and you'll want to review for possible non-discrim testing issues.

[Guest Kberly]

Thanks!