New plan vs keeping old plan

[ombskid]

The assets of Corp A were bought by LLC B. Corp A sponsored a profit sharing plan for man years. One of the shareholders of Corp A is a memeber of LLC B

One option is for LLC B to adopt the existing plan and keep it going.

One new owner suggests terminating the old plan and starting a new one to prevent LLc B from having any liability for any problems (not are expected) that might crop up for the previous years.

Any thoughts on what liabilities the LLC B might have? If a problem was found in any previous year, would sanctions be against the defunct former owner? Would the new owner have any responsibilities for mistakes made by the previous sponsor?

[ETA Consulting LLC]

Yes. When you take over sponsorship of an existing plan, you become the responsible party for any qualification defects (current and prior). This is something to consider when making this type of decision.

Good Luck!

[Lou S.]

It is a question of cost benefit. Is the cost of terminating the old plan and establishing a new one less than assuming the risk of problems with the old plan.

[MoJo]

A good "due diligence" review/audit of the old plan can mitigate against the risks. Terminating the plan will have the "risk" of having employees who spend what was intended for retirement, and while some employers say it's not their concern, there are some interesting studies/articles out there on the very real costs of having an employee population not on track for retirement.