New company sponsor and adopt old plan

[SSRRS]

Hi, 

John owned company A and had DB Plan for six years. He sold company A in an asset sale (not stock sale). John after the sale immediately opened Company B that does different services than what A offered (new type of company). He wants to contribute this year and get a deduction. 1.Can his company B just become an additional sponsor and adopt the DB Plan that his original company A had? As if he starts a new DB for his new company then he will not have any prior service for the first year of this plan and his maximum.Contribution will be low.  (Company B is most likely in a controled group with A as both owned by John 100%...but would rather have company B join the plan of A by becoming an additional sponsor of A's plan, rather than joining Plan A bec of the Controlled Group, bec John wants to close down company A). 2. If he can adopt and becomes a new sponsor of the Plan that A had , can he close down compny A or should he keep.it open? Thank you very much for any insights regarding this.

[QDROphile]

It might help to know what is going on with Company A after the asset sale.  Does it have any assets, activity, revenue, or employees (what is to close down?)? What is its form of organization:  C Corp?  S Corp?  LLC?  Proprietorship?  Same questions for what is going on with Company B, including whens (when formed, when active, when it employed anyone).  While various options are available, what is optimal depends on a lot of circumstances.

[SSRRS]

Thank you very much. Company A was an S Corp and  has no assets,  liabilities,  no operations, and no employees since it was sold in April 2018. The bank account for A is open but with nothing in it. The New Company B was opened in July 2018 and he Hired about ten employees then in July 2018. So John plus the ten employees are on B since it was opened in July 2018. B is also a Corp. Can A be fully dissolved now and can the bank account for A be closed? Or do we need A to offical be open. Thank you very much.

[QDROphile]

The circumstances involve too many moving parts for me, and probably for this forum.  You need professional advice from someone competent in both corporate and pension law.

[SSRRS]

QDROphile Thank you for your insight and attention to this issue. Is it possible to at least advise re the following below?

If Corp A is kept open and Corp B joins the the Plan of A (bec..A and B both owned 100% by same person thus a CG,), then can the owner who has only one year of service so.far in B use the past service that he has from.Corp A? Thank.you.very much.

[SoCalActuary]

Can they use the past service? It appears they already have service in this plan from employment in Corp A. The owner is still a participant.

[SSRRS]

SoCalActuary thank you so much! You really zoned in on what I was trying to get help on , and just could not convey it properly. The owner is the only employee in Corp B that remained from Corp A (as all A employees terminated when he made the asset sale of A, and all employees of B are new fresh employees) , and thus he has the years of service from Corp A (as A and B are a CG).  Is it possible to help on the following as well?   Question: Is the owner "forced" on keeping A open (even though no employees and no more activity- was an asset sale and not a stock sale so he still owns A) so that the CG between A and B remains in effect and thus the DB Plan, that is now sponsored by Both A and B, can keep factoring in for the owner the years of service from A. (The asset sale of A was in April of 2019 and He opened Corp B in July 2019). Thank you very much.

[SoCalActuary]

The simple issue is about adopting employers and recognizing service.  If this is still the same plan, you add Corp B as an adopting employer.  When Corp A closes, you need to make sure that credited service from Corp A is recognized.  And you amend the plan so that Corp B is now the Plan Sponsor.

 

[SSRRS]

Thank you again SoCalActuary. Your brilliance has brought much needed clarity and direction.