Participant Loan Rollover Question-Asset Acquisition of Company

[MarZDoates]

Company A is purchasing the assets of Company B. Company B's employees will be employed by Company A and be eligible to participate in Company A's 401(k) Plan.

Company B's plan currently permits loans.

I understand that loans can be rolled from one plan to another.

However Company A's plan currently does not permit loans.

Can Company A amend their plan to allow participant loans only for those employees coming over as part of the acquision? They do not want to permit new loans to anyone.

Thanks.

[ETA Consulting LLC]

That may challenge the notion of loans being made available to participants (or beneficiaries) on a reasonably equivalent basis.

I wouldn't do it.

Good Luck!

[mphs77]

If Company A is purchasing the assets of Company B, then won't Company B still exist?

And if that is true, Company B could still sponsor their Plan which would allow the loans to exist it it's Trust.

[rcline46]

mphs77 - most documents require loans to be repaid or deemed distributed on termination, so even if B keeps its plan, the loans have to go.

ETA - I would not have a problem with only allowing transferred loans in a plan, and no new loans permitted. Loans are not a protected benefit. Since no new loans are permitted, the bit about being available is a non-issue since no loans are available.

[QDROphile]

Agree with rcline on paragraph 2.

As a practical matter, Company B will probably not maintain the plan and will not want to maintain the loans if it maintains the plans, but legally the loans could be maintained in the B plan. Administration would be a pain. Company A could agree to a payroll feed to the B plan, but no one is going to go to such an effort.

[MarZDoates]

Thanks for the input!

[mphs77]

rcline46 - true most plans require loans to be repaid upon termination, but not all plans require this so it is something that should be investigated.