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Message Boards Digest

December 22, 2021

Here are the most recently added topics on the BenefitsLink Message Boards:

Towanda created a topic in Mergers and Acquisitions

Freezing a DC Plan Following Stock Purchase

"Our 401(k) client (the Buyer) acquired a company in November through a stock purchase. The Seller has an existing 401(k) Plan that was not terminated prior to the acquisition. The Buyer wishes to bring employees from the acquired company into their 401(k) Plan effective for the first pay period in 2022. The plan document has boilerplate language that excludes employees acquired under a 410(b)(6)(C) transaction.

By preparing a Joinder Agreement, my understanding is that the transition period is voided since this Joinder would serve as an amendment to the Buyer's plan. I assume the first line of defense is to freeze the Seller's 401(k) plan effective January 1, 2022 until the Buyer decides whether they will:

  • Permanently Freeze the 401(k)
  • Merge the Seller's 401(k) into theirs
  • Maintain 2 plans (highly unlikely)

I have been asked to put together an outline that breaks down the implications of each decision. I've found most of what I need, but I am having trouble locating information on freezing a DC plan. In fact, it isn't clear to me why, in a stock purchase, a plan termination is off the table if the plan wasn't terminated prior to the acquisition.

Let's throw another wrench in the works. Existing client has a SH Match, and acquired client has a SHNEC. What are the implications in a merger? The more I think about it, the more tangled it becomes. I have access to the 2021 EOB, but haven't found anything pointing to freezing a DC plan, or explaining why it is too late to terminate the Seller's plan.

Can anyone point me to a resource, or provide me with a location in the EOB that will assist me in my response. Thank you!"

1 reply so far   |    Click Here to Add a Reply

HarleyBabe created a topic in Mergers and Acquisitions

Merger of 3 Companies Into One - Each Has a Plan

"Current client: Partnership with a 401(k) Safe Harbor Match plan. Two other companies merged into my current client to become one company. The two other companies are going to keep open their S Corps for pay purposes. We will have 3 equal partners now. One of the other companies has a 401(k) plan. We want to either terminate or merge that into my current client's plan and then amend my current client's plan into whatever we redesign. Should we terminate that other plan, or do we need to merge it because the other owner is keeping his S corp open?"

2 replies so far   |    Click Here to Add a Reply

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