Spin-off or sale of subsidiary

[Guest JMN]

Corporation sponsors defined benefit and defined contribution plans that cover employees of wholly owned subsidiary. Wholly owned subsidiary is spun off to shareholders of parent or sold to a third party buyer. Assets and liabilities of the parent's defined contributino plans attributable to the employees of the spun-off (or sold) subsidiary are transferred to a new plan sponsored by the subsidiary. No assets are transferred from defined benefit plan(s).

Does the sale of the subsidiary stock make this an asset sale transaction (think so), or is it a stock deal?

For the 401(k), can the spun-off (or transferred) employees take distributions on account of the fact they are no longer considered employees of the parent?

[Guest Sieve]

Sale of subsidiary's stock obviously makes this a stock sale. No termination of employment resulting from stock sale for those who continue employment.