Corporate transactions

[Belgarath]

So, Corporation A and B form a controlled group. "A" is the sponsor of a plan, and "B" is a Participating Employer.  For purposes of this question, let us assume that "A has an EIN of "1" and "B has an EIN of "2."

We just found out that someone purchased "A" several months ago, SUPPOSEDLY in an asset purchase. The information is a bit sketchy at this point, as the new owners of the assets of "A" will apparently keep the same business name, but change the EIN to another number. I don't know enough about corporate transactions to know if this is possible - in other words, can I purchase the assets of "A" and those "assets" include the right to continue doing business under the same name, but just under another (new) EIN?

If so, then it appears that "A" and "B" are now, in fact, still a controlled group, as "A" still exists under EIN #1 and the ownership technically hasn't really changed? And that the asset purchase/issue of new EIN now creates a new entity, "C" which must now choose either to adopt the assets and liabilities of the former "A" plan, or establish an entirely new plan?

I'm finding this very confusing when determining how to handle the plan issues. All of the employees of "A" are now part of "C" if in fact there is a new entity "C." Whether "C" will continue with a plan is unknown. But "B" wants to continue to sponsor the plan as is, with no involvement with "A" or "C." This works fine if there is no controlled group, as if there isn't, it is just a Multiple Employer Plan at this time, and can withdraw or spinoff or whatever under normal procedures.

I'd love to hear nay thoughts on this. Getting solid data from the client in this situation is like pulling hen's teeth, so I'd rather have a better understanding of the corporate issues before using the vise-grips. Thanks! 

[A Shot in the Dark]

B: Often times in an asset sale the business name will be sold as an "asset" and will become part of the asset sale.

[david rigby]

It might be hasty to assume that a new entity (C) was created in the asset purchase.

[QDROphile]

How do A and B constitute a controlled group?  How does "someone purchased A" affect the factors that determine the relationship, or not?

[jpod]

It sounds like A and B are still a controlled group treated as a single employer, but only if there is still one employee of A following the asset sale.  However, I don't see why that's important or relevant to anything. 

There is no need to guess as to the disposition of the plan.  If no provision was made in the sale agreement, then the plan stays with A (or A and B) and distributions to former employees of A shall proceed in accordance with its terms. 

Of course there is a C, how could there not be?  It may not be a new entity, but there has to be a C.  However, C is irrelevant if, as most likely the case, no portion of the plan is to be spun off to C.

 

 

[Belgarath]

QDRO - let me see if I can clarify what I was trying to say.

Let's say that I own 100% of A and B. I sell the assets of A, as discussed in the original post, but A still exists, since it was an asset sale. So, A and B are still a controlled group, but there are no employees of A, as they have all gone over to "C."

I've been informed me above this is a normal thing to do in a corporate transaction (and it seems very reasonable).

So, to now transfer plan sponsorship to "B" it really seems like just a matter of amending the plan to change the sponsoring employer - it isn't a "multiple employer" situation, as it is still a controlled group. Thoughts? Thanks again.

P.S. - so, assuming "C" will not assume any of the assets in a spinoff, etc. transaction, then this is a severance of employment for the former "A" employees, a partial plan termination with 100% vesting, etc. - distributable event - all the normal stuff.

[jpod]

Yes, assigning sponsorship to B is no big deal, and is reported as such on the next 5500.

[QDROphile]

I agree with jpod.