Distribution permitted? 401(k)(10) rules and Same Desk

[Guest RW]

Corp. A sponsors a 401(k) plan in which wholly owned Sub. B participates. In 1999, Corp. A owned Subs. C, D and E in addition to Sub. B. During 1999, all Subs. except B were sold. How does the "transfer of less than 85% of assets of a trade or business" rule apply to the above scenario, if at all?

[Alf]

I am not clear about which rule you are asking about. Is it the substantially (>85%) all the assets distribution event rule in the code and regs or the less than substantially all (<85%) of the assets exception to the same desk rule?

[Guest RW]

What's the difference? Can you answer the question under both rules?

[Guest hank]

Could be a big difference in whether "separation from service" distributions from the plan are permitted, RW. Rev. Rul 2000-27 ("Same Desk Rule Lite" )applies in certain circumstances when there is sale of less than substantially all assets (i.e., less than 85%). For the full-blooded application of IRS' same desk rule, consult Treas. Reg. 1.401(k)-1(d)(4) and Rev. Rul. 79-336.

[Richard Anderson]

Whose is going to get a distribution? Subs C. D. and E were sold, but Corp A and Sub B were the participating employers.

[Guest RW]

Can Sub. B get a distribution? After the other Subs were sold, Sub. B was the only Sub. left under Co. A.

[MWeddell]

No, employees in Sub B were not affected by the transaction. They have not experienced a distributable event.