new company, same 401k

[tertue]

Thinking for in the future: Company A has a 401K psp. Eventually Co A will dissolve, but a different Company B (doing completely different kind of business) will be formed with 2 of the 5 shareholders from Co A.

Only 1 shareholder from Co A has ever had a W2/401k account and likely the same employee/owner will be the only 401k account holder in Co B.

What is the best or easiest way to keep the original 401K psp for Co B? Or is this not even possible? Can Co A's 401K psp also be sponsored by Co B at the same time. Then when

Co A decides to dissolve, just transfer the 1 employee's 401K accounts to Co B's 401k plan?

Hope this isn't confusing, but I know what I'm talking about

[ETA Consulting LLC]

I would terminate the old plan and establish a new one. The shareholder with the sole account can roll over into an IRA until the new 401(k) is set up; and then rollover into the new 401(k). When you try to link the two companies, you'd have to establish whether they are a controlled group. I think they must actually exist "at the same time" in order for that to be possible. If you were to set up a separate (unrelated) company and they purchase the first company's assets, you may take over the sponsorship of the portion of plan containing their employees through a spinoff (but why would you do that when they are in a separate business).

Good Luck!

[12AX7]

Is there anything that would prevent Company B from sponsoring Company A's plan as a successor sponsor even if there was no connection through through an acquisition? There may be practical considerations for not wanting to take these steps, but one advantage is not having the burden of setup costs associated with a new plan.

[ETA Consulting LLC]

I don't think there is; as long as the employees being spun off are employed with the new company.

Good Luck!

[tertue]

Don't want to terminate the plan if possible due to costs. What steps would need to be taken for Company B to become a successor sponsor to Company A's plan?

[12AX7]

The simple answer is that Company B adopts Company A's plan as the successor Plan Sponsor. Take a look at the Plan Document to determine if the prococess is prescribed somewhere in the language of the document. Some pre-approved plans incorporate elections for a successor sponsor. If you're not sure, talk to the document provider, they should be able to guide you further.