My company has a 401k plan, our new owner (a corp) does not have or wa

[Guest e bercot]

My understanding is that under a controlled group rule, both companies must have a 401k plan, or we must drop ours. Is there some kind of alternative to dropping our plan?

[Guest]

I think that you're referring to 401(a)(26) which was repealed for defined contribution plans such as 401(k)s. So you should be able to maintain your plan, although the new owner may not want to bother with the adminsitrative costs/hassles. (I personally think it costs more NOT to have a retirement program for employees).

[Guest James S. K]

There is, however, no flat rule that your company can or cannot sponsor its own 401(k) plan now that it is a member of a controlled group. It depends on whether or not your company will satisfy all of the qualification requirements (in particular, coverage and nondiscrimination) sponsoring its own plan. In some cases, such as where one company in the controlled group has proportionately more highly compensated employees, it may not satisfy those requirements, and, therefore, be unable to sponsor its own plan.

Your company will get the benefit of a special rule for acquired companies under Code section 410(B)(6)© which, under certain circumstances, allows your company to continue to test these requirements without regard to the new controlled group for a transition period.