Can a Control Group maintain a 401k and a SEP IRA

[Vlad401k]

I have a quick question regarding Control Groups. Here's the scenario: Company A did an asset purchase of Company B. They now form a control group. Company A has a SEP IRA and Company B has a 401k. Can both of these plans be maintained under this scenario?

[austin3515]

Well, yes, except that the SEP must cover all employees of the controlled group.

[Vlad401k]

Thanks for your help. In regard to compliance testing, do you know if the plans have to be aggregated for anything else other than the top heavy test?

[austin3515]

I do not believe so. For example, we researched having a 401k plan covering everyone, and a SEP covering everyone. The only person who met the SEP eligibility was the owner and we found that was acceptable. We were going to make the 401k a 3%SHNEC to cover the THM. We never ended up doing it, but it was a good plan nonetheless.

I think you get one 415 limit by the way.

[shERPA]

If company A did an asset purchase of company B, then company A did not buy the stock of company B, so A and B are not a controlled group.

If, with the asset purchase company A hired company B's employees, they are all employees of company A and they would be eligible for A's SEP based the SEP's eligibility criteria.

Company B would still have its 401(k) plan unless Company A adopted it.

Clarify what sort of acquisition it was.

[austin3515]

Ah, the op tricked me. Asset purchase and controlled group are irreconcilable in your example. The two cannot coexist.