Assumption of existing 125 plan

[Belgarath]

If a corporation (A) changes name, entity type, and gets a new EIN for the new corporation (B), is there any reason why (B) can't assume the assets/liabilities of the existing corporation (A) Section 125 plan, similar to what often occurs in the qualified plan world? I don't see why not, although Section 125 and the 125 regs don't appear to address this. But there is some info in RR 2002-32.  With all the mergers/transactions going on, I assume this happens all the time?

[Chaz]

I'm not sure what assets or liabilities that a Section 125 Plan would have.  All a section 125 plan does is provide participants with the ability to pay their share of the cost of coverage for certain benefits on a pre-tax basis.

[Luke Bailey]

1 hour ago, Belgarath said:

With all the mergers/transactions going on, I assume this happens all the time?

Belgarath, your assumption would be correct. In an actual asset acquisition there could be some corporate tax issues in that the buyer is assuming a liability of the seller and whether that should be capitalized, but the number is typically small and my guess is the issue is usually overlooked.

[Belgarath]

Thanks all. Chaz - just as an example, what about a Health FSA or a Dependent Care account?

[Brian Gilmore]

Assuming the new entity is within the original controlled group, I would just amend the Section 125 cafeteria plan doc to include the new plan sponsor information going forward.

If the new entity is from outside the original controlled group, I would just follow he standard M&A approach.

• Here's an overivew: https://www.newfront.com/blog/merger-acquisition-rules-health-fsa-2

Here's a slide summary:

Newfront Office Hours Webinar: M&A for H&W Employee Benefit Plans

[Belgarath]

Thanks!