Spin Off of 401k Assets

[Guest RS Vatalaro]

If a block of people in a 401k plan are going to work for an unrelated employer because of a company sale (assume same desk rule is an issue), and the unrelated employer sponsors a 401k plan, and the intention is that the 401k balances of the people moving to the new employer will be transferred to the plan of the new employer, do the transferred employees have the option to leave their 401k balances in the plan of the company they are leaving (some don't want to move their assets - but understand that if they begin deferring it would be into the plan of the new employer).

Thanks in advance for any help.

[davef]

I don't think that the employees need to be given the option of leaving their money in the old plan. You just need to be concerned about preserving any 411(d)(6) protected benefits. See Reg. Sec. 1.411(d)-4, Q-3. Giving employees the option is a requirement only if the transfer is "elective."

[Guest beppie_stark]

To put a slightly different spin on Dave's reply...I believe that if the new employer's plan does not include all protected benefits then the transfer cannot be mandatory and the n the tranferred employees would have the ability to leave their balances in the old plan if those balances exceed $5000.