Does the sale of a division and associated transfer of plan assets and

[John A]

The 5310-A instructions say not to file a Form 5310-A if 2 or more DC plans are merged and a. the sum of the balances in each plan prior to the merger equals the fair market value of teh entire plan assets, b. the assets of each plan are combined to form the assets of the plan as merged, and c. immediately after the merger, each participant in the plan has an account balance equal to the sum of the account balances the participant had in the plans immediately prior to the merger. Is this exception met if Company A sells a division to Company B and all of the above would be true if Company A's plan only covered the division being sold?

[Guest]

Yes. You look at the plans not the fact that there are two sponsors.

[Dowist]

What you've got here is not only a merger, but a spinoff. In other words, you start by spinning off the assets of the Division A employees and then you merge that "plan" with the new plan. Reg. ss 1.414(l)-1 goes through the requirements for a spinoff/merger.

But to summarize, what you're planning to do is ok. BUT, be careful with the first of the requirements you cite - as I understand it, it means that you can't merge a plan with unallocated assets (suspense account) into another plan - the idea being that the rights to assets to be transferred be entirely settled before the transfer so that the assets don't go to the wrong persons (for example if the suspense account went to participants in the other plan).

The odd thing about the 5310a instructions is that they say that you can merge plans without the notice provided that they meet the requirements set out in the instructions. But if you can't meet those requirements (which are the same as the requirements of Reg. ss 1.414(l)-1) you don't meet the requirements of that regulation, so you can't merge anyway!! Some practioners merge anyway; they send in the 5310a notice with "an actuarial statement" that describes how the unallocated amounts will be allocated in the new plan so as to provide those amounts to the proper participants.

[Dowist]

What you've got here is not only a merger, but a spinoff. In other words, you start by spinning off the assets of the Division A employees and then you merge that "plan" with the new plan. Reg. ss 1.414(l)-1 goes through the requirements for a spinoff/merger.

But to summarize, what you're planning to do is ok. BUT, be careful with the first of the requirements you cite - as I understand it, it means that you can't merge a plan with unallocated assets (suspense account) into another plan - the idea being that the rights to assets to be transferred be entirely settled before the transfer so that the assets don't go to the wrong persons (for example if the suspense account went to participants in the other plan).

The odd thing about the 5310a instructions is that they say that you can merge plans without the notice provided that they meet the requirements set out in the instructions. But if you can't meet those requirements (which are the same as the requirements of Reg. ss 1.414(l)-1) you don't meet the requirements of that regulation, so you can't merge anyway!! Some practioners merge anyway; they send in the 5310a notice with "an actuarial statement" that describes how the unallocated amounts will be allocated in the new plan so as to provide those amounts to the proper participants.