Stock Sale - Successor Plan?

[jmartin]

Company A has a 401k plan. Company B has a 401k plan. Both companies are unrelated. On 12/30, company A terminates its 401k plan. On 12/31, Company B purchases the stock of Company A.

What is the impact on the retirement plan of Company B...and even Company A?

It is our understanding that the the intent of Company A was to allow its employees to distribute their account balances before they were considered employees of Company B.

Due to the stock sale, wouldn't we have a controlled group and therefore no "severance from employment" due to having the "same employer", and wouldn't that prevent the participants from taking distributions (successor plan issue)?

Or does the fact that Company A terminated the plan before the sale take precedence?

[QDROphile]

The IRS buys into the idea that the termination of the A plan occurred under Employer A. When corporation A stock was acquired by Corporation B, A became a member of the Employer AB controlled group. The B plan of Employer B and Employer AB is not a successor plan to the A plan because the A plan was never maintained by Employer AB. The A plan was terminated before Corporation A became a member of Employer AB. Never mind that the wind up and liquidation of the A plan is managed by personnel of Employer B. Never mind that a plan is not terminated for tax purposes until all of its assets have been distributed.

[Bill Presson]

Agree with QDROphile. We've had this happen several times over the years with our own company as we've merged with other accounting firms.