Leaving a PEP

I have a client who has a 401(k) in a PEP plan.  They want to leave the PEP and transfer their existing employee balances to their new 401(k).  Can they do this without triggering a distributable event?  In short...they just want to escape the PEP and have their own standalone plan without allowing their employees to withdraw their existing funds.  I was assuming they can...but wanted some thoughts on this.  Thanks!

yes, sounds like standard successor plan issue, (which means no distributable event). I suggest contacting the PEP to get a copy of the plan document. There should be a section in there about termination of participation in the PEP by a employer and I would bet it mentions spin-off to a stand alone plan and possibly even use the term successor plan. The ones I've seen from PEPs seem to be fine in those regards. 

1 hour ago, Nic Pospiech said:

without allowing their employees to withdraw their existing funds.  I was assuming they can

As J noted - not only CAN they do this, they MUST do this.