Participant Owner With Two Businesses Seeks Distribution

Owner owns 100% of Companies A and B; A has employees but B does not.  Company A sponsors a 401k plan in which only the owner and her spouse have account balances (yeah, I know...), comprised entirely of pre-tax elective deferrals and safe harbor matching contributions.  She wants to sell A and have B become the new Employer/Sponsor.  The FT William document that the plan has permits a participant to receive their benefit following their 'Termination of Employment', which is defined as 'any absence from service that ends the employment of the Employee with the Employer'.  

The owner would like to take advantage of her upcoming 'employment termination' by taking a distribution from the plan and rolling it into her IRA.  Company B does a different type of work than company A did, but they are in the same general industry.  I mention this because I recall something about a  'same desk rule' and am not sure if it still applies here.  Can she receive a distribution like a terminated participant based on the above information?

Why not just terminate the plan?

The answer to the question, as posed, is no.

Over NRA?

Are they over 59.5?  Then can add an in-service w/d provision.

They haven't reached the NRA of 62 - they are in their early 50s.  The reason they'll like to keep the plan going is because they're interested in acquiring another business within the next year and would like to avoid terminating this plan and starting a new one.  Would it be acceptable to reduce the plan's NRA to 52 or 53 in order take a distribution, or does the age 59.5 restriction still apply for withdrawing deferrals & SHMACs while employed even though NRA is attained?

7 minutes ago, Lucky32 said:

They haven't reached the NRA of 62 - they are in their early 50s.  The reason they'll like to keep the plan going is because they're interested in acquiring another business within the next year and would like to avoid terminating this plan and starting a new one.  Would it be acceptable to reduce the plan's NRA to 52 or 53 in order take a distribution, or does the age 59.5 restriction still apply for withdrawing deferrals & SHMACs while employed even though NRA is attained?

You still have the 59.5 restrictions for deferrals and safe harbor money. Also in the first post, you referred to a "termination of employment", but if she just sells assets and keeps the employer, she's not terminated. If it's a solo invested plan, what could she invest in using the IRA that she can't use in the plan?

These kinds of questions always seem to not provide all the relevant details.

Bill, it's a complete sale of the employer, not just the assets.  There is no guarantee that she and her spouse will remain the only participants with account balances when the new business is soon acquired, and though she doesn't mind contributing to the plan for NHCEs, she would rather not have to make available to them the opportunity to invest in the illiquid assets she wants to buy for the IRA.