Plan / Company Merger

Facts:

Company A, owned 100% by Adam has a 401k plan

Company B, owned 100% by Bob has a 401k plan

Neither company are currently related in any way.

They are going to form Company C (33% owners each with a third unrelated owner) starting July 1, 2022.

All of Company A clients and employees will move to Company C

95% of clients and employees of Company B will move to Company C.

The owner of Company B will be on payroll and Company B & C.

The idea is to have Company C take over as plan sponsor of Company A.

The question is:

1. Can company B retain their 401k plan and not be related to Company C? The owner would like to keep his assets where they are while all of the employees of B transition to C would roll their money over. 

2. Or should Company B terminate 6/30/22 to avoid issues.

3. For Testing purposes, how should this be handled?

     1/1-6/30 for A, 1/1-6/30 for B and 7/1-12/31 for C?

     C do 1/1-12/31 for A employees and 7/1-12/31 for B? 

any help would be great.

A lot of issues here. Does not appear there is a controlled group between B and C, although would need more facts to confirm, ditto for affiliated service group. Some potential for affiliated service group, but that is a very fact-intensive analysis. Whether there is a controlled or affiliated service group obviously goes to the testing issues.

If most of B's employees go to C, you may well have a partial termination, if any portion of the B 401(k) is unvested.