Successor Plan for Distribution Limits

[Guest rcm]

Under 401k (10), a terminated 401k cannot be distributed if the "employer"

establishes or maintains a "successor plan." In a stock deal, Co A acquires Co

B. Just before acquisition, Co B terminates its 401k by board resolution and then, soon after its acquisition by Co. A, Co. B adopts Co. A 401k plan. Would this be a "successor plan"? Note that at time Co. B terminated its original 401k plan, it was not part of a controlled group which included Co. A.

[Guest bswift]

we have used that same strategy in a number of transactions (both stock and assets) and the IRS has taken the position that the acquired company's plan has not been "maintained" by the acquired company. Therefore, the acquired company is able to distribute assets after receiving IRS approval to allow participants roll over assets into the acquired company's plan or into an IRA or buy the bass boat. good luck.

[QDROphile]

Please tell us much, much more about the situations in which you got IRS approval in stock acquisitions, and the nature and formalities of IRS approval, or any supporting authority. If this scheme passes IRS muster, it would be a nice solution to recurring difficulties in acquisitions.

[Guest bswift]

QDRO - The idea originally came out of a transaction we did a couple of years ago. We notified the IRS of the issue on the Form 5310 filing and the IRS issued the favorble determination letter. We have not received a private ruling, but my recollection is that the IRS has issued one on the issue. IRS officials have confirmed in recent seminars that terminating the aquired company's plan prior to the close of the transaction will prevent the acquiror from having "maintained" the plan after the close even though the acquiror agrees to assume the acquired company's plan. It does make life alot easier under the (k)(10) rules. Hope that helps.