Controlled Group

[Lou S.]

Company A is owned 40% Father & 60% son#1, 0% son #2. Son #1 & son #21 both over age 21.

Company A sponsors a 401(k) plan

Company A is disloving.

The next day - 2 new companies are created

Company B owned 98% son #1 and 2% father

Company C owned 98% son #2 and 2 % father.

All the employees from Company A will be hired by either Company B or Company C in substanially the same jobs they had at Company A.

Are A & B a controlled group even though they technically do not exist at the same time?

Can B takeover sponsorship of the 401(k) and continue the plan or do they need a new one with plan A requiring termination?

Can C adopt the plan? If they do, assuming no change in plan provisions or coverage of the plan other than sponsorship change, can the group be tested together for coverage and discrimination until the end of the plan year following the transaction or because C is new company that is no controlled with A or B - even though 100% of their employees will be from A - do they need their own plan?

Why they are doing it this way I have no idea but their accountants/estate planners are structuring it like this and I haven't seen this particular set of facts before.