Separation from service?

[EGB]

Facts: Employee of Corp. A terminates employment with Corp. A and moves to Canada to become employee of Corp. B. Corp. B is a wholly-owned subsidiary of Corp. A. Employee participated in Corp. A's 401(k) plan and wants to take a distribution. Has employee separated from service from Corp. A (ie, is employee entitled to a distribution of his elective deferrals)? Note: Corp. B employees are not eligible to participate in Corp. A's plan. Corp. B has its own retirement plan established under Canadian law. Any citations

would be greatly appreciated.

[Guest mo]

I'm not sure what bearing, if any, the Canadian aspect of the new company has on the situation, but I believe that moving from one member of a controlled group to another, whether or not the new employer sponsors a plan, does not constitute termination of employment. BNA agrees based on the premise that they are considered the same employer under Section 401. PLR 8546123 and GCM 39384 are cited.

[KJohnson]

I don't think there has been a termination of employment, much less a separation from service. "Employee" is defined using controlled group provisions of 1563(a). See 414(B) I do not believe that the statute or the regs exclude foreign corporations from this controlled group provision. (Controlled group rules in other non-plan contexts do exclude foreign corporations). Therefore, your employee is still employed by the deemed single employer under the controlled group provisions.

I know there is a Rev. Rul. on this, but I don't have the cite handy.

[EGB]

Thanks so much for your responses. My suspicion is confirmed.

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