204(h) Notice in M&A Transaction

[mr_erisa]

Client sponsors a cash balance plan and is solely owned by a Parent entity.  All employees are employees of the Client and receive W-2s from the Client.  Prior to August 1, the Parent was neither the plan sponsor nor a participating employer in the pension plan.  On August 1^st, the Parent sold 100% of the stock of the Client to a third party Buyer.  Following the closing, Client and Parent are no longer part of a controlled group.  Immediately prior to the sale, the Client and Parent both signed resolutions that, effective August 1, transferred sponsorship of the plan from Client to Parent, and removed Client as a participating employer in the plan.  Parent is now taking steps to terminate the plan.

Clearly, all compensation and accruals for January 1 through August 1 for employment with Client should be counted under the plan.  However, no 204(h) notice was provided to employees giving them notice of the August 1 change in plan sponsorship.  Does the Parent still have to include post-August 1 compensation until a 204(h) notice is given and its timing runs out?  Or, are they just treated as having terminated employment because their employer no longer participates in the plan?  There was no amendment to freeze or change benefits, although the change in plan sponsor has that effect because none of the employees work for the Parent and all employees remained Employees of client.  

Thanks for any thoughts.  The change in sponsorship is not a PBGC reportable event because the plan is fully funded, and the parties will treat the transaction as a partial plan termination and fully vest all participants.  

[Lou S.]

M&A is not my specialty but I think you'll want ERISA counsel to weigh on whether the amendment assigning Plan from Client to Parent is valid without the 204(h) Notice as it clearly will reduce future accruals of the employees in Client since they will be no longer be getting credits under the Plan since the Plan is transferred to Parent and the employees of Client will no longer be employees of Parent's controlled group. There may be some exceptions in M&A that I'm not familiar with though.

[CuseFan]

https://www.law.cornell.edu/cfr/text/26/54.4980F-1

There is an M&A special timing, but still 15 days advance. If only affecting an early retirement subsidy, then you have 30 days after, but that's not your situation. Maybe 204(h) wasn't needed and everyone is just terminated, but I want counsel to opine on that as Lou recommended.