Merger/Acquisition where one corp sponsors a SIMPLE-IRA

Corporation A sponsors a 401(k) Plan. Corporation B sponsors a SIMPLE-IRA. Corporation A is purchasing Corporation B in a STOCK sale, not an asset sale. Question is, can the employees of Corporation B participate immediately in Corporation A's 401(k) plan?

I don't think so. While there is the IRC 410(b)(6)(c) transition period and the 408(p)(10) period available for continuing to run the plans separately, since this is a stock sale rather than an asset sale, the corporation still exists, and the SIMPLE can't be terminated mid-year.

If it were an asset sale, then no problems.

Any other thoughts/opinions?

If the Corporation B employees are now employees of a wholly owned subsidiary of Corporation A, why couldn't they participate immediately in the 401(k)? You wouldn't have to terminate the SIMPLE mid-year; just "encourage" the employees to begin participating in the 401(k) instead. If they use the employer match in the SIMPLE you would only have a partial year worth of deferrals to match.

Off the top of my head, my recollection is that the SIMPLE transition period in 408(p) allows the 401(k) sponsor to continue maintaining the SIMPLE without violating the no-other-plan rule or greater-than-100-employees rule as long as you don't make coverage changes to the SIMPLE. The situation above wouldn't alter coverage in the SIMPLE. 

Thanks, but even if a wholly owned subsidiary, how can Corporation B sign on as a Participating employer in the Corporation A plan, without violating the "only plan" rule for a SIMPLE? Corporation B would then be sponsoring both a 401(k) and a SIMPLE during the same calendar year. That's the part that is hanging me up.

I'd have to dust off my research, but I think you still get the transition period under 408(p) because you haven't changed the coverage of the SIMPLE. The 408(p) transition allows you to "violate" the one-plan rule for a limited amount of time as long as you don't modify coverage in the SIMPLE. You changed the coverage of the 401(k), so if Corp A is relying on the 410(b) transition rule it might blow that on the 401(k) side. But as long as you haven't added any Corp A employees to the SIMPLE, you still have the SIMPLE transition period and can terminate the SIMPLE presumably at 12/31/18. 

Ah, I get what you are saying - the dispensation under (10)(B)(ii). Thanks.