Partnership splitting and want their own plans

Hi

This is a new one for me.

Law firm Partnership XYZ is splitting (no PBGC coverage). Currently sponsor a DB and DC plans. 2 partners and a bunch of employees.

Partner Mary wants to keep the current plans.

Partner Joe wants to set up his own DB/DC combo in his new company. Joe also will take a few employees with him.

Other than treating Joe and a few employees as terminated and carrying over the benefits accrued in the DB plan to the new law firm, is there anyway to transfer DB benefits for Joe and the employees coming with him?

Or new plan(s) has to be set up for Joe's new company?

For the DC plan which has deferrals+SH+PS, if a new plan needs to be established for 2023, can SH still be set up for 2023?

Any suggestions/experience with this situation is appreciated.

Thanks

A new plan(s) will be needed, presumably for Joe's company. A spin-off, as suggested by Peter Gulia, feels better to me, although I'm not sure if there is any significant difference between that and treating the employees as terminated and then letting them roll over. Well, having said that, there are two issues that come to mind - vesting, and retention of assets. A spin-off keeps the assets under Joe's control; a termination of employment and distribution of assets means the employees can take the money and run.

A SH plan generally needs 3 months but I think there is an exception for a new company just started.

I agree that an end-of-year spinoff is the way to go, with a minor quibble; I don't think one plan can release assets on Dec 31 and the other receive them on Jan 1.  It should be simultaneous. Depending on the assets, it might be wise to liquidate in December in preparation.

I’ve seen practitioners arrange a transfer as of midnight between December 31 and January 1, with the receiving plan’s administrator and its professionals finding that beginning that plan’s Form 5500 reporting with January 1 is good-enough reporting.

I’ve also seen transactions in which everything happened within December, and others for which everything happened on January 1 or 2.

I’ve never needed to consider which choice of transaction date or what reporting is correct. Other BenefitsLink neighbors can explain the reporting.

As with any transaction, a decision-maker shouldn’t conclude anything until one has collaborated advice from one’s lawyers, actuaries, accountants, and other professionals.

19 hours ago, Peter Gulia said:

I’ve seen practitioners arrange a transfer as of midnight between December 31 and January 1, with the receiving plan’s administrator and its professionals finding that beginning that plan’s Form 5500 reporting with January 1 is good-enough reporting.

Not a big deal but part of my thinking is with the knowledge that Form 5500 asks about transfers between plans, including details on plan name, tax id, and amount, I assume or at least think that their computers cross-check. I'm sure it could be explained without any problems but to my way of thinking, having to explain is a loss.