My company may be acquiring a 60% ownership in another company in a stock deal. If we let the target's employees into our 401(k) plan, will we create a multiple employer plan? Is there a bright line rule for determining when a multiple employer plan exists?

Multiple empoyer plan usually refers to union plans. Multi-employer other is what you will have If you are not in a controlled group / affiliated service group with the other company. Parent sub controlled group requires 80% or more ownership.

Multiple ER plans can also be established by companies that have a business relationship or common ownership, but do not satisfy the related employer definition of IRC 414(b)or ©, as is the case here.

The guidelines for multiple employer plans are set forth in Code Section 413©. In addition, you cannot sponsor a multiple er plan under a prototype document, so you may have to restate onto a custom drafted plan doc if you are currently using a prototype.

I disagree with rcline46 - MULTI-EMPLOYER is usually union. MULTIPLE EMPLOYER is usually non-union, although union employees can participate in a multiple employer plan.

Thanks for the responses. My bottom line question is whether a multiple employer pension plan may exist when a company acquires less than an 80% interest in another company. I had been informed that there was some question whether such a plan could exist if the ownership interest was between 50-80%, but couldn't find any authority to support the statement. Any thoughts would be appreciated.

For most purposes, 80% common ownership is required. Do the owners of the other 40% of the new company own 0% of your company? If not, then you still have two separate controlled groups. If they are in one plan, you have a multiple employer plan.

An exception is that for applying the 415 limits, only > 50% common ownership is required for parent-subsidiary controlled groups, which includes your situation. See Code Section 415(h).

You might be getting multiple employer pension plans confused with MEWAs. As I understand the rules for MEWAs (and I am by no means an expert), 50% or greater common control is assumed to be enough to avoid the MEWA label, but the code rules for pension plans require 80% common control to avoid multiple employer plan status.

Any disagreements with these general statements?

You might be creating an affiliated service group, depending on what industry the potential acquired company is in. In that case, the rules, as I understand them, mean that the ASG is treated likea controlled group, not a multiple employer.