Employer becomes part of controlled group

[Belgarath]

don't work with these, but the question came up - at a quick look through 125 and the regs/proposed regs, it wasn't apparent to me that this transition period would apply? Anyone know if it does or doesn't?

[Chaz]

don't work with these, but the question came up - at a quick look through 125 and the regs/proposed regs, it wasn't apparent to me that this transition period would apply? Anyone know if it does or doesn't?

There is substantial uncertainty but I have taken the position that there is no statutory or regulatory support to apply the transition period to welfare plans.

[Belgarath]

So, just for my own edification, what the heck then happens? Plans are possibly out of compliance on the day the businesses become a controlled group? Does the IRS look the other way on this if they amend the plans to cover everyone under the same rules by, say, the next plan year, or is this just not an item currently on the radar,etc? Seems like it would be reasonable to extend this treatment to cafeteria plans, but since I don't work with them, maybe I'm all wet and it shouldn't apply for good reasons...

Anyway, thanks for the response.

[Chaz]

All I can say is (and with a sigh) welcome to the world of welfare benefit and cafeteria plan compliance.

[Belgarath]

Well, it was a quick visit to your home planet, and I'm glad I'm quickly back here on Earth. And I hope to stay here. Thanks again!

[Belgarath]

Another somewhat related question came up - and I don't work with these plans! Suppose I buy the assets of your corporation, so no CG/ASG. I have a 125 plan, and your corporation whose assets I purchased also has one. I hire all of the former employees of your business as of the date of the sale.

A. For purposes of eligibility/nondiscrimination testing in my plan, it would appear that I count your former employees in my plan only from their date that I hire them. Agree/disagree? (As an aside, CAN I credit prior service if I choose, similar to what I can do in a 401(a) plan?)

B. Now, if I have immediate eligibility in my plan, and no 410(b)(6)© transition period is available, then I don't know what the heck I'd do. Theoretically, this should have been addressed through due diligence work wen I purchased the assets of your corporation. But if it wasn't, what does one do?

C. With regard to your plan, where there are no longer employees other than you as owner - what happens? Is it terminated? Do you get a "pass" on testing for the rest of the year, for example, where there are no current employees - in other words, are former employees excluded from testing? I'm not sure if I'm even asking the right question. As long as you passed up to the time all employees were terminated, is everything ok?

Thanks!