410(b)(6)

[R. Butler]

Ownership of Co. A is

X 42.5%

Y 42.5%

Others 15%

At 01/01/13 Co. B was owned

X 35%

Y 35%

Z 10%

W 20%

Mid year 2013 W's shares are purchased by Co. B and are no longer outstanding.

Once Co. B purchased those shares form W, Co. A & Co. B becmae a controlled group. We just found this out. Any argument that the 410(b)(6) transition rules can be used? I don't see that it is really an acquisition, but I'm hoping.

Thanks for any guidance.

[jpod]

Boy, I doubt it. The transition rule was intended to provide some breathing room after arm's-length acquisitions. I doubt a redemption of an existing owner qualifies under even the most liberal interpretation of the statute or regulation.

[shERPA]

Seems like it should be available. Per the code, B "became a member" of a CG. And per the regs, clearly there was a stock acquisition, B repurchased W's shares, this resulted in a change in the "employer".

Are you thinking this wasn't a full sale or acquisition of the company, just a reshuffling of the stock ledger, and this prevents the use of the transition rule?

From the code:

© Special rules for certain dispositions or acquisitions

(i) In general If a person becomes, or ceases to be, a member of a group described in subsection (b), ©, (m), or (o) of section 414, then the requirements of this subsection shall be treated as having been met during the transition period with respect to any plan covering employees of such person or any other member of such group

From the regs:

(f) Certain acquisitions or dispositions. Section 410(b)(6)© (relating to certain acquisitions or dispositions) provides a special rule whereby a plan may be treated as satisfying section 410(b) for a limited period of time after an acquisition or disposition if it satisfies section 410(b) (without regard to the special rule) immediately before the acquisition or disposition and there is no significant change in the plan or in the coverage of the plan other than the acquisition or disposition. For purposes of section 410(b)(6)© and this paragraph (f), the terms “acquisition” and “disposition” refer to an asset or stock acquisition, merger, or other similar transaction involving a change in employer of the employees of a trade or business.