Removing Participating Employer as of Purchase Date

A participating employer in my client's 401(k) plan is being purchased in less than a month, and the agreement says they must be removed as a participating employer of the 401(k) plan and the employees must be removed from the plan as of the transaction date. The employees are to be moved to another plan, but it is not feasible for the recordkeeper to set up a new plan until at least March 1st. 

Any ideas on how to make sure the agreement is followed with this administrative restriction?

About the workers of the soon-to-be former participating employer, which organization will be their employer after the transaction date?

The acquiring company will be their employer as of the effective date of the transaction, which is in just a few weeks...

Removing the participating employer on the transaction date is fairly easily done. 
 

I can’t imagine “removing” the participants as of the transaction date. It’s either a distribution or a spinoff and that will all likely take way more time. 

How about a spin off and merger? I know there is a lot of queasiness about plan mergers, but I think the concerns tend to be exaggerated. Or just a spinoff, as suggested by Bill Presson.  Spinoffs occur as of the spinoff date, no matter how much time it takes for asset transfer, plan documentation, and other administrative matters. Some dates are more difficult than others.

Could that sentence be interpreted as "marked as terminated"? There's no way, operationally, to 'remove' anyone quickly.

Spin-off can be date of acquisition with the plan document being a copy of the current document amended to state that the sponsoring employer is the participating employer being spun off.

khn, assuming your description of the deal agreement, your client might not know what set or series of retirement plan transactions would satisfy the business deal until there is communication involving (at least) the seller and the buyer, perhaps each plan’s administrator (if either plan’s administrator is distinct from, respectively, the seller or the buyer), and maybe each’s lawyers and accountants.

For example, a spin-off, even if otherwise a nice idea, might be a nonstarter if the acquirer’s plan won’t accept it.

If the deal teams didn’t communicate about these points more fully and sooner, that’s disappointing. Deal work often happens that way. Even if it’s now only days until a closing, your client might want to surface some remaining retirement plan questions.

@khn  perhaps provide the specific language of the purchase agreement.  The word "removed" is not a term that I have ever seen in a purchase agreement (as it is ambiguous at best) and, from the responses above, it appears the responders are struggling with this concept.  Being removed could simply mean that no one will have any obligations to make further contributions to these employees under the plan effective as of closing.  I mean your client would want some form of a withdrawal of participation agreement that says this at a minimum (along with all the other required provisions...whatever they may be).