Controlled Group Situation & Owner Sold One Business - Help

[HarleyBabe]

Have a plan that was a controlled group because the owner owned 100% of two similar firms. He is selling one of them completely and will have no interest any longer. What do I do with this Plan now. The other employer would like to maintain the Plan. Because they are similar firms, both rehabs, can we have a Multiple Employer Plan and have one firm be the sponsoring firm? Or is this a Spin off situation. I basically need ABC instructions on what to do Plan Doc wise and best way to approach.

Thank You.

[QDROphile]

A multiple employer plan is feasible and not that much trouble. Some testing and reporting is done employer-by-employer, so some ecomomies of scale are lost and the serivce providers have to know what they are doing. The plan and trust documents will have to be amended. Spin off works, too, and will give each employer complete freedom and responsibility with respect to their plans.

[HarleyBabe]

So, if we do a spin off, what are the steps I should take with the document, moving the money from the current account and opening a new... How do I show the loss of employees, as just terminated per say?

[12AX7]

Just to backtrack a bit, I'm not convinced that there is necessarily an option for a multiple-employer plan in this situation. If there is no longer common ownership, what is the factor that binds the employers to a MEP?

If a spin-off is done, the current plan document should reflect that the prior related employer is no longer an adopting entity of the plan, a new plan and trust (account) is created for the spin-off plan to receive the assets. Not sure what you mean about showing the loss of employees - do you mean on the Form 5500?

It all takes a little bit of planning and timing to get the pieces together.

[QDROphile]

What requirement is there for a binding factor other than a desire to particpate?

[12AX7]

My concern was more with the "closed MEP" rather than the "open MEP" concept. Othern than a single plan document, what would be the advantage?

[QDROphile]

Possible economies or critical mass for certain services such as fiduciary and investment management. I don't favor MEPS of truly unrelated employers, MY point was more that that they are feasible and not to be feared. The question was "Can we have a MEP?"

[MoJo]

What requirement is there for a binding factor other than a desire to particpate?

Check out the DOL's Advisory Opinion 2012-04A. They will treat such an arrangement as TWO SEPARATE PLANS, albeit using a common document, absent some commonality that binds the companies (as fiduciaries).