Merger of Plans

[Scott]

A controlled group consists of Company A (parent) and Companies B and C (wholly-owned subsidiaries). Each of the three companies has its own 401(k) plan and trust. Company A's plan allows participants to direct their investments into a number of funds, through Investment House 1. The plans for Companies B and C are virtually identical and allow participants to direct their investments into a number of funds (which are the same as each other, but different from Company A's plan), through Investment House 2.

For reasons not relevant to this question, Company A wants to merge all three plans within the next few days. Ultimately, the trusts will be merged and only one Investment House will be retained, but the decision has not been made as to which Investment House, recordkeeper, trustee, etc. will be retained for the merged plan.

Can the plans be merged and then, for a temporary period, can the merged plan continue to utilize the two Investment Houses, with different investment funds available for different groups of employees, and with three separate trusts, until the plan assets can be consolidated into one trust and one Investment House?

Any thoughts would be greatly appreciated.

[MWeddell]

There are a number of other problems with merging the plans (who will produce trust statements suitable for auditing, does the document have to be amended beforehand to avoid any 411(d)(6) problems, and whatever else I've not thought of), but compliance testing isn't a problem.

Having different investment options for various groups of participants is a benefit, right, or feature that is subject to testing under Treas. Reg. 1.401(a)(4)-4. However, assuming the plans have not had a problem passing 410(B) coverage testing, then a combined plan also won't have a problem with benefit, right, or feature testing.

[This message has been edited by MWeddell (edited 01-12-2000).]