Stock Sale - Plan Termination

Hi, 

One of the plans is scheduled for termination due to the stock sale, but it has come to our attention that the acquiring company does not offer a 401(k) plan. Typically, under such circumstances, the plan should terminate prior to the sale date, with all contributions ceasing accordingly. However, in this case, while the stock sale date is set for September 30, 2025, employee contributions are expected to continue until December 29, 2025. Could you please confirm whether these post-sale contributions can be accepted? Additionally, if there are any specific compliance considerations or steps we need to take in this scenario. 

If the plan was not terminated by corporate action (resolution, amendment, etc.) prior to the sale closing then it came over to the buyer as a result of the transaction and the buyer can maintain for however long it desires and contributions can continue. If the plan was officially terminated pre-sale then the only contributions that should have been withheld and subsequently remitted were those attributable to pre-sale payroll and receivable as of the sale closing date. If the buyer now has the plan, a termination thereof would mean a one year wait to establish another 401(k) if subsequently desired.

Why wouldn't the post sale contributions be allowed? 

if that business entity is still operating, people are still on payroll, the plan is not terminated(or frozen), then the post sale contributions have to be allowed. The change in ownership in and of itself doesn't change those participant's rights or ability to defer. 

A plan termination date prior to to the stock sale date does preserve a variety of other things, so often is preferred. But is not required. 

Also - what do you mean "scheduled for termination"? 

When the plan is terminated (benefit accruals stop), when it stops accepting deposits (trailing deferrals and employer contributions), and when it actually pays everything out and the trust is $0, are all different things. Absent a company resolution to terminate the plan(and subsequent amendment to the plan document to conform) the plan continues as is. It just might face additional compliance requirements. 

Since the sale already occurred - you should check with the business entities and see if their buy/sale agreement addresses the plan. I've seen cases where a termination  resolution was drafted by the business attorneys and executed just prior to the sale, and then a copy included in the stock sale agreements. Maybe the plan is terminated already.