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Company Ownership Changes/Mergers & Acquisitions

If you are thinking of selling your company or acquiring/merging with another company, we would be happy to consult with you on the options regarding your retirement plan. Many times the retirement plan gets overlooked in these transactions, and it is imperative that decisions regarding the retirement plan are made prior to the sale to avoid inadvertent consequences.

In planning for your potential transaction, a few key considerations in regards to 401(k) plans can go a long way. Actions moving forward will depend upon whether the purchase is an asset sale or a stock sale.

Options for asset sale:

  • Seller may continue the plan
  • Seller may terminate the plan
  • Plan may be transferred to buyer as part of the sale.


Options for stock sale:

  • Terminate plan prior to the sale
  • Merge the plans



Due Diligence

  • Plan Documents/Interim Amendments
  • Summary Plan Descriptions
  • Favorable IRS Letters
  • Most Recent Form 5500s
  • Board Resolutions
  • Participant Notices
  • Discrimination Tests
  • Contribution Reports

List of Challenges

  • Severance of Employment
  • Crediting of Service for Eligibility/Vesting
  • Coverage/Nondiscrimination Testing
  • Determining HCEs
  • Plan Contributions
  • Plan Distributions/Successor Plan
  • Protected Benefits
  • Plan Loans


You do have time to merge a 401(k) plan post-sale using the 410(b)(6)(C) Transition Rule.

Applies to: 401(k) plan sponsors that buy another company with an existing 401(k) plan in an asset or stock sale

How it works: You are allowed to perform nondiscrimination testing on the two 401(k) plans separately during the transition period. If plan satisfies coverage at the time of transaction, the plan is deemed to pass coverage during the transition period.

Transition period: begins on the date of transaction and ends on the last day of the following plan year.

Using the transition rule, there cannot be a substantial change in plan coverage other than those that are a direct result of the transaction.

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