Spin-off question

[fiona1]

ABC company has a 401(k) plan with a 1/1 plan year. Division A is spinning off - and employees of Division A are no longer able to defer to this plan effective 3/1/2013.

However, Division A does not set up their plan until 6/1/2013.

What should happen to the contributions of Divison A from 3/1/2013 to 6/1/2013? Should they go to the original plan and then transfer over to the new plan once its set up? Should these contributions go to an interest bearing account in the meantime?

[Bill Presson]

ABC company has a 401(k) plan with a 1/1 plan year. Division A is spinning off - and employees of Division A are no longer able to defer to this plan effective 3/1/2013.

However, Division A does not set up their plan until 6/1/2013.

What should happen to the contributions of Divison A from 3/1/2013 to 6/1/2013? Should they go to the original plan and then transfer over to the new plan once its set up? Should these contributions go to an interest bearing account in the meantime?

They shouldn't be withheld because Division A doesn't have a plan during that period.

[Guest Pennysaver]

They shouldn't be withheld because Division A doesn't have a plan during that period.

I agree with Bill; if they have no plan in effect during that period, then 401(k) salary deferral contributions may not be withheld from employees' compensation.