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removal of participating employer who is no longer related


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Posted

Companies A and B were related due to a controlled group. Company A sponsors a qualified plan, Company B is a participating employer. Due to recent ownership changes the companies are no longer related. Company B decides to terminate all employees and the entity will no longer exist. Company B will be removed as a participating employer. Company A does not want the balances of Company B participants to remain in the plan due to administrative concerns. 

Question: What can be done with the balances of the terminated Company B participants who have funds in the plan? Is there any exception to forcing out a participant whose balance exceeds $5,000 in this situation?

I have not found this situation addressed in the plan document.

Thank you

Posted

Short of spinning off company B employees to a new company B plan (before Company B ceases to exist) and then terminating the company B plan I am not aware of a rule that would let you cash out the terminated employees from the current plan.

Posted
9 minutes ago, Lou S. said:

Short of spinning off company B employees to a new company B plan (before Company B ceases to exist) and then terminating the company B plan I am not aware of a rule that would let you cash out the terminated employees from the current plan.

Agreed. It's all about the timing on this.

William C. Presson, ERPA, QPA, QKA
bill.presson@gmail.com
C 205.994.4070

 

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