Participating employer withdrawal from plan

[Belgarath]

Corp A sponsors Plan A. Corporation B, while partially owned by Corp. A, is not part of a Controlled Group/Affiliated Service Group. Corp. B is a participating employer in Corp A's plan, so it is a Multiple Employer Plan.

Corp B. is buying out the ownership that Corp A currently has in Corp B, and is withdrawing from the Corp A plan. Suppose Corp B does NOT want to maintain a plan. Is there any alternative to Corp A invoking the involuntary spinoff provisions (establishing a new plan in Corp B's name, which Corp B can then terminate)? I'm confused as to the alternatives in terms of the accounts of the Corp B employees who have been participating. They haven't terminated employment with Corp B. I feel like I'm missing something obvious.

[EBECatty]

If Corp B will not have a plan, I think you are left with the spinoff and termination provisions (hopefully with Corp B's cooperation, but involuntarily by Corp A if not). Or, I guess, continue administering the accounts of Corp B employees, but there is not a distributable event by the corporate transaction itself. 

[Belgarath]

Thanks! Yes, hopefully Corp B will be cooperative. As far as I know, there's no bad blood, but we'll see...

As an aside - suppose it was a controlled group situation - while it would be allowable for the employees of the withdrawing employer to leave funds in the "lead employer's" plan, why in the world would the lead employer want to allow it?

[Paul I]

I have seen a situation where the plan had employer securities available as an investment option.  A division was sold to an unrelated company and many of the spun off employees did not want to sell and wanted to remain in the plan and the lead employer did not want to have large sales of employer securities impacting its share price (the stock was publicly traded).

 

[EBECatty]

In a controlled group, they could leave accounts behind, but once the other entity leaves the seller's controlled group those employees would have a distributable event. So, unless they did a plan-to-plan transfer to the buyer's plan, the former employees could keep their balances in the seller's plan or roll them out like any other terminated employee. 

Paul, I've seen similar situations before as well. On occasion we handled with a self-directed brokerage account in the buyer's plan and a plan-to-plan transfer. That obviously won't work if the buyer does not have/want a plan.