Rollovers

[Guest Golden401k]

I'm a 51% owner in Company A who sponsors a 401(k) Plan and then terminate employment and sell my ownership.

I then start Company B where I'm a 51% owner and establish a 401(k) Plan.

I then take my distribution from Company A 401(k) and rollover the money into Company B 401(k).

Would this money be considered an unrelated rollover in Company B 401(k)?

Does the answer change if I was a 100% owner in Company A and B?

[masteff]

Related or unrelated for purposes of what? I'm sensing an ulterior question you're trying to answer and knowing that would help us know the context of this question.

[Guest Golden401k]

Ultimately it effects the Top Heavy test in the plan the $$ is being rolled into. I need to make sure I'm classifying the rollover correctly.

[Jim Chad]

If there is no other common ownership, either directly or indirectly, I believe they are unrelated as stated.

If you were 100% owner of both companies, than the rollover would be related.

[Guest Golden401k]

Are you saying I should apply the control group rules to determine if the entities are related even though the entities did not exist at the same time?

[Jim Chad]

FWIW I think so.

I am looking forward to hearing what others think.

[masteff]

Interestingly, Reg 1.416-1 T-32 (which addresses related and unrelated rollovers) says in part: "For purposes of determining whether two employers are to be treated as the same employer, all employers aggregated under section 414(b), © or (m) are treated as the same employer."

414 takes us to code section 1563(a) which contains some timing rules.

But then Reg 1.416-1 T-6 says in part: "For purposes of determining whether the plans of an employer are top-heavy for a particular plan year, the required aggregation group includes each plan of the employer in which a key employee participates in the plan year containing the determination date, or any of the four preceding plan years."

But is determing "unrelated vs related" a component of the "purposes of determining whether the plans of an employer are top-heavy for a particular plan year"? Which is to say: does T-6 govern T-32 (and therefore require a 4-year lookback)? I'd say yes, so 4-year lookback.

I also think if the rollover had gone to an IRA and then come into Plan B, then it would lose it's related character.

[PensionPro]

Are you saying I should apply the control group rules to determine if the entities are related even though the entities did not exist at the same time?

The operation of section 414(b), © and (m) and the regulations thereunder necessarily require that controlled group members exist concurrently. However, also see post # 9 of this thread: http://benefitslink.com/boards/index.php?showtopic=8553