Definition of Compensation

[britoski]

Need your thoughts...stock acquisition, Buyer acquires Target mid-year. Buyer assumes Target's 401(k) plan (and intends to merge it into its own at the commencement of the following plan year). Buyer began allocating a profit sharing contribution based on compensation on a payroll-by-payroll basis immediately following acquisition date. Other than the fact that the allocation has excluded pre-acquisition compensation, the contributions have been allocated according to a definition of compensation that satisfies a 414(s) safe harbor.

Under these circumstances, has the contribution that has already occurred been allocated according to a 414(s) definition? Or must we test the employer contributions considering pre-acquisition compensation as well?

I can't find any guidance on this, but there must be a rule! Anyone out there considered this before?

[QDROphile]

If the transaction was a stock purchase, nothing changes about the plan sponsor, the plan or the employees except that the plan sponsor has a new owner. I don't recall that the owner of a plan sponsor has any effect on discrimination rules unless the owner is a government or a church. There is a choice under section 410 about operating the plan independently in the year of merger (and the year following) or treating the plan as a member of the buyer's controlled group. Within the plan itself, the stock purchase should be irrelevant.