Business Acquisition and SH 401(k) Plan

[Dougsbpc]

A company maintains a calendar year SH 401(k) with 3% Nonelective safe harbor contribution.

They just informed us today that their firm will be acquired tomorrow (always nice to be informed at the last minute).

If they terminate the plan now, our understanding is as follows:

1. They do not need to provide advance notice.

2. They need to provide the 3% SH contribution based on compensation through the termination date.

3. Participants do not need to be given the opportunity to change salary deferrals.

Questions:

1. Are they required to pass the ADP test from 1/1/14 through the date of termination?

2. Since the firm that is acquiring them also sponsors a 401(k) plan, would there be any problem with distributing salary deferrals (the one year rule)?

Thanks.

[lalaland]

(1) No, assuming they are safe harbor through the date of the termination.

(2) Is the deal an asset deal or stock deal? In a stock deal, if the plan is terminated prior to the acquisition, no problem. The plan can't be terminated following a stock deal. If the deal is an asset deal you wouldn't be asking this question because the plan would be an excluded asset from the deal and this wouldn't be an issue either.