Successor Plan Sponsor

[12AX7]

100% business owner sponsors a 401 (k) Plan. He then forms a new company with another owner (50-50) and the employees are scheduled to work for the new company starting on 1/1/13.

The new company would like to sponsor the existing 401 (k) Plan and I don't think there should be any issue with that under normal circumstances. There's no problems with the existing plan that I'm aware of.

Is there anything else that should be considered? For example, do I need to credit service prior to 1/1/13 for the employees that are covered under the existing plan because their employment will transition as of 1/1/13 to the new company? Or is the new company considered a successor employer?

Thanks.

[Lou S.]

Technically doesn't appear to be a controlled group so safest course would be to grant service with the prior entity if that's the intent.

[12AX7]

I'm just not clear on succeessor employer issues, so I agree to do as you suggest. It can't hurt.