Asset Purchase with New Safe Harbor

[perkinsran]

Company A acquired Company B on 3/27. Company A does not have a plan and Co B is terminating the plan and employees will receive a distribution payout. Co A wants to establish a Safe harbor 401k plan and allow all of company B employees to immediately contribute. Any reason that Co B had a plan would prohibit the safe harbor status? Also can employees that are in Co B that have a loan roll those loans to new plan. Thanks so much.

[Lou S.]

I don't see why the new company can't start a plan. If it was a stock purchase my answer would be different.

If company B wants to allow loans to be rolled in, they could. Most plans don't.

[QDROphile]

One of the costs to Company A of business acquisition is professional help with repect to benefit plans. The questions begin before closing and before the decision to terminate the Company B plan. The desire of Company A to have a 401(k) plan should have been considered and the route to the goal mapped out before any transactions, including termination of Company B plan were carried out. All of your questions should have been answered already. It is just a matter of finding those who know to satisfy your curiosity.

Those who know would also have information that must be gained by anyone who reads your messsage and might try to answer your questions, starting with the nature of the transaction (stock sale or asset sale?), the timing of the termination of the 401(k) plan, and certain critical terms of the Company A plan and the Company B plan with repsect to loans and rollovers.

Are you sure that the acquisition did not occur on April 1?

[QDROphile]

I now see in the title that is was an asset purchase. Unless there is something in the terms of the acquisition transaction or the relationship of the buyer and seller, the new Company A plan should be unaffected by the transaction and the Company B plan. Loan rollovers are legally permitted and depend on the loan, distribution, and rollover terms of the repsective plans.