Assumption of liabilities

Brain cramp!!! Suppose corporation A sponsors a plan. Newly formed corporation B now purchases the assets of corporation A. Corporation A still exists.  No controlled group/affiliated service group involved.

Can corporation B assume the liabilities of the corporation A plan and become the new plan sponsor, if both corps. are willing? I feel like I'm missing something...

P.S. - I think they can - just concerned I'm missing something.

Thanks.

I don't see why not. Amend the plan to name B as the plan sponsor, and revoke A's participation in the plan all at once. I would make it clear in the amendment that prior service with A is included for all purposes.

And make sure that it is very well spelled out in the agreement that B is taking over the liabilities.

And, this is not a "distributable event" for Corp A employees who transition and become Corp B employees.

10 hours ago, Belgarath said:

I feel like I'm missing something...

Understandable feeling, Belgarath, since the principle by which one employer, as a result of a transaction, can "hand over" sponsorship to another employer, if the two plan sponsors agree, is not really directly stated in ERISA or the Code, but is certainly implied by IRC sec. 414(l) and has been a consistent part of practice since the enactment of ERISA, and probably before. Technically, the employees do have a separation from service, so back when I drafted a lot of individually designed plans I used to include a provision specifically addressing the authority of the employer to transfer plan assets and liabilities in a sale of assets transaction. I think probably most plan documents do address that, both individually designed a pre-approved. Most do not explain to employees in SPD, however, and they probably should, as a qualification to the statement in the SPD that "you can get a distribution following separation from service."

1 hour ago, JRN said:

And, this is not a "distributable event" for Corp A employees who transition and become Corp B employees.

Right, but it would be, and would require full vesting and termination, if the two companies did not agree that the acquirer would take the plan over.

Thanks all.