hospital buys doctors office

[Guest michaelviola]

Any comments are appreciated.

A Doctor's office has a calendar year PS and MP plan (about 25 participants), with a 1000 hours/last day employment required for contributions. Both plans have immediate entry after satisfying 21 & 1.

Now a large hospital will be buying the office, on 9/30. After that date, all non-doc's will no longer be working for the office, while the doc's will still be considered ee's of the office until 12/31.

A couple questions that I see are:

1. Can/Should the 9/30 be taken as the last day of the plan year for allocation purposes? Otherwise, only the doc's will share in the 1999 contributions.

2. One of the doc's is expected to enter the plan on 12/15/99. Unfortunately, the plan uses full year compensation for allocation purposes. Would this doctor be eligible for a contribution in either plan for 1999?

3. If 9/30 is viewed as the last day of the PY for allocation purposes, should hours/415 limits be prorated for 9 months?

4. Since most of the employees/participants are non-doctors, it would seem that we have a partial termination after 9/30, agreed?

5. Are there good reasons to initiate a short plan year, plan termination, MP accrual freeze right away?

Thanks for any and all comments!!

Mike

[Guest lforesz]

Hi,

We are facing the same type of event right now with all staff leaving the firm 5/31 and all partners staying on until past year end. We have advised them that 1) yes it is a partial plan term and 100% vesting of staff is required but 2) partial plan termination only accelerates the vesting not contribution accrual requirements, so 5/31 does not become the last day of the plan year and no matching contribution is required for ther terminated staff. Did you find the same thing?

But, another rub. The mathcing contribution would never pass the ratio percentage test under 410(B) for the year because only HCES would benefit and the staff that terminated before year end would have more than 500 hours so would be included in the test. So, unless they can pass the ABT, they may not be able to give a match to partners or else they may wind up having to give a match to terminated staff.

Just something else to think about.

Can you do me a favor and let me know how your situation panned out?

Thanks