Must buyer credit seller employees' prior 401(k) service for ESOP eligibility and vesting?

[SundanceKid]

In an equity transaction, the buyer  maintains both a 401(k) and an ESOP. Following the acquisition,  must the buyer credit the acquired employees' pre-closing service, previously recognized under the seller's 401(k), for purposes of eligibility and vesting in the buyer's ESOP?

[CuseFan]

Yes, unless there is some ESOP specific exception of which I'm unaware. ESOP Guy?

[Artie M]

What am i missing?  I don't see it that way. For an equity transaction:

• target remains the same legal employer after closing.
• becomes a controlled-group member at closing.
• Post-closing service with that target/now sub generally must be recognized by the buyer ESOP under the related-employer rules.
• pre-closing service is not automatically imported into the buyer’s ESOP merely because the seller’s 401(k) previously recognized it--this falls under predecessor service rules.
• I don't think there is a special ESOP rule changing that result (but I am no ESOP expert); my recollection is that ESOP eligibility and vesting follow the rules applicable to qualified plans generally.

I know that service must be counted beginning at closing, but just because they are in a new controlled-group relationship I do not believe pre-closing seller service for ESOP eligibility or vesting must be counted.  I think 414a (1 or 2?) says that predecessor plan service is only required when the employer maintains the predecessor's plan. 

To me pre-closing service would be credited only if required by one of the following:  buyer’s ESOP document (see definitions of employer, Related Employer, employment commencement date, elapsed-time service, and predecessor service); SPA or other transaction covenant; a continuation, merger, or assumption of the seller’s plan that implicate 414a or protected-benefit rules (didn't see that in the facts).  

If this is pre-closing and still negotiating terms, seems the buyer should not necessarily have to adopt the seller 401k's historical service determinations wholesale. If the ESOP grants prior service, perhaps an amendment could specify whether it recognizes actual employment with the target under the ESOP’s own service-counting rules, or instead adopts service as credited under the seller plan. Those can produce different results.

Of course, I defer to anyone providing contrary authorities as I have not taken the time to look for any.... sorry.