Company acquiring another company

[kwalified]

A plan sponsor of a small esop is considering acquiring a small company. The plan sponsor wants to use prior years of service with the predecessor potentially acquired employer for vesting(6 year graded)/eligibility purposes(1YOS/Age18). The document touches on affiliated employers as well as Participating employers but I don't see why prior service with the acquired employer can NOT be used for plan purposes when those participants are acquired. The benefits, rights and features of the current participants are not reduced. Am I missing something?

Thanks

[Bill Presson]

A plan sponsor of a small esop is considering acquiring a small company. The plan sponsor wants to use prior years of service with the predecessor potentially acquired employer for vesting(6 year graded)/eligibility purposes(1YOS/Age18). The document touches on affiliated employers as well as Participating employers but I don't see why prior service with the acquired employer can NOT be used for plan purposes when those participants are acquired. The benefits, rights and features of the current participants are not reduced. Am I missing something?

Thanks

No. Just amend the document to allow prior service. Be sure the amendment uses language specifically for eligibility, vesting, etc.

We have this done for plan all the time.

[masteff]

One thing to consider in this amendment is whether they want a time window during which the employee must start work at the new company. This way, you reward the people who come to the new company w/in some reasonable time frame (3, 6, 12 months) and not someone who goes away and then shows up several years later. Ex: "employees of the ABC company who start employment with XYZ company between 6/7/2012 and 12/31/2012".

Just be careful if some member of management remains in the former company to wind it down because you might find yourself amending your amendment (at my former employer, we often (privately) called certain amendments by the name of the executive it benefited; which is to say, I'm speaking from experience on this one).