Merger of a company

[Guest DBSI]

Say a company has a 401k plan and that company is being merged into another company. For it to be an “distributable event” the IRS regulations require "That the plan terminates and no successor defined contribution plan is established" - does that merger a "distributable event" make? Even if the new company has a 401k plan (is that the successor defined contribution plan?) - since in essence the company being taken over is terminating their plan would the participants still have the option of rolling over their funds into an IRA versus having to move the funds into the new plan? The new plan supposedly has only 10 options versus the brokerage window we have now? Thanks for any insight!

[QDROphile]

The plan termination is the distributable event. Merger changes the controlled group so the successor company's plan is not a successor plan. That is the theory, anyway. There is one important timing element that comes out of that logic. Can you guess?

If you guess correctly, then you might have to grapple with the meanng of "plan termination" and how it means different things for different purposes.

[Lou S.]

What I think QDROphile is trying to say is you might be able to roll to an IRA if you get your company to terminate the Plan before the merger. Many times the company is reluctant to to do this for variuos reasons. And often times the question is asked too late, like after the merger has happened.

[Guest DBSI]

Thanks for clarifying the time line - appreciate the help!