Control Group and Plan Termination

[Guest fidelityrose]

Facts:

Company A purchases 80% of stock in Company B in 2007. Both A & B have existing 401(k) Plans with 12/31 Plan Year End. Transition period ends on 12/31/2008. Company B terminates their 401(k) plan on 12/31/2008 and distributes all assets during 2009. Neither A or B is a participating employer in the other companies plan. Prior to stock acquisition neither company had any ownership interest in the other. Company A has 10,000 employees while Company B has less than 50 employees.

Questions:

1. When do companies A & B become related control group members--on the acquisition date in 2007 or after 12/31/2008 when transition period ends?

2. Does 401(k)(10) prevent Company B's terminated plan from distributing deferral assets in 2009 because Company A maintains a 401(k) plan?

3. Does the fact that no employees in Company B are allowed to participate in Company A 401(k) plan either before or after acquisition entitle Company B's terminated plan to distribute deferrals because Company A plan would not be considered an alternative defined contribution plan?

Thanks.

401(k) Plan Terminations in control group

[Guest Sieve]

1) Date of acquisition.

2) I believe Yes, since the determination of "employer" is as of the date of termination, and the controlled group exists by then (i.e., there is now one employer). If termaintion of the plan occurred before the controlled group existed, that would have been ok, since the alternative plan would have been the plan of another employer. (IRS Reg. Section 1.401(k)-1(d)(4)(i).) But, the next item helps . . .

3) If no B employees are participating in A's plan, then A's plan is not an alternative DC plan--as long as no B employe who participated in the B plan participates in the A plan for the 12 months after distribution of all assets from B's plan. (Same cite as above.)

[Guest fidelityrose]

1) Date of acquisition.

2) I believe Yes, since the determination of "employer" is as of the date of termination, and the controlled group exists by then (i.e., there is now one employer). If termaintion of the plan occurred before the controlled group existed, that would have been ok, since the alternative plan would have been the plan of another employer. (IRS Reg. Section 1.401(k)-1(d)(4)(i).) But, the next item helps . . .

3) If no B employees are participating in A's plan, then A's plan is not an alternative DC plan--as long as no B employe who participated in the B plan participates in the A plan for the 12 months after distribution of all assets from B's plan. (Same cite as above.)

Thanks for your quick response!

Rose