Plan termination

[cpc0506]

I have a client who is being bought and wants to terminate the plan before the purchase.

Supposed date of close of company is August 8. Payroll runs from 7/24 to 8/6, with payment date of 8/13. Is it okay for a check that is dated later than the plan termination to have deferrals?

[ETA Consulting LLC]

Technically, no. There is nothing precluding the employer from defining the date of termination as 8/15 in order to account for the deferrals that are going to happen. That would've likely made the offical company closing date 8/15 as well. The key is that no additional accrued benefits occur after termination. This is part of the workflow that should be done with plan terminations.

Good Luck!

[cpc0506]

Technically, no. There is nothing precluding the employer from defining the date of termination as 8/15 in order to account for the deferrals that are going to happen. That would've likely made the offical company closing date 8/15 as well. The key is that no additional accrued benefits occur after termination. This is part of the workflow that should be done with plan terminations.

Good Luck!

I do believe that there might be an issue if the company is sold to another company that has a 401k plan. That is why the plan must be terminated before the sell of the business. The date of purchase is set for 8/8/11. Is this not a merger/acquisition issue?

My concern is what is the defintion of compensation. We use w-2 compensation, so in instances when the pay earned is from one period, (say 12/22/10 to 12/29/10) but paid in the next period (Jan 2 , 2011) this compensation paid on 1/2/11 we consider 2011 compensation. Is this not the same issue or am I reading too much into the dates?

Thanks for any guidance you can give.