Successor Plan - The surprise plan

I have a plan that was a start up plan in 2023. They just notified us through their annual compliance questionnaire that the owner had a soloK that he rolled into the start up plan that was set up with a different name and EIN. Upon further questioning as to why he did not tell us about this prior plan he stated because it was for his other company before he had employees. He did not make any contributions to it in 2023 - he only made contributions in the new start up plan along with his employees.  He only mentioned it because his provider for his soloK told him that he had a problem because of the successor plan rule.  What is the best way to correct this situation?

It sounds like you need to confirm (with backup documentation) exactly what was done and when it was done.  Was the soloK actually terminated?  Were there common law employees in the other company eligible for the soloK at any time in the existence of the plan?  Does the other company still exist?  Were the soloK plan eligibility provisions drafted in a way that would extend eligibility to the current company employees?  What did the owner think was the distributable event that allowed for a rollover? ...

There may be a problem because of the successor plan rule.  There may be a problem because there is a controlled group.  There may be a problem because there are eligible employees who are due benefits.  There may be a problem because there are missed deferral opportunities (assuming these are 401(k)s)...

In almost all of these scenarios, consider involving an ERISA attorney at least to review all of the facts and proposed remedial actions.

This is the kind of surprise with a new client that we all dread.  Stick to the facts and follow them to where they lead, and consider asking the questions about other plans to your due diligence process for accepting new clients.

Good luck!