Does a defined benefit plan become a multiple employer plan if it continues to allow service credit and age for employees after such employees leave the controlled group for as long as they are employed by the subsidiary that is sold? This situation involves the sale of a subsidiary where years of service and age will be credited (for early retirement purposes) for as long as the participant continues to be employed by the subsidiary. The subsidiary will not be a sponsor and will not be responsible for any of the benefit accruals. If this does constitute a multiple employer plan, what are the ramifications to the plan sponsor and the subsidiary? Thanks for any input.

Service to an unrelated and nonparticpating employer can be credited under a plan as "imputed service," subject to limitations and conditions. See the 401(a)(4) regulations. Your arrangements may run afoul of the limits.

Seems to me that if the former subsidiary has not adopted and is not "sponsoring" the plan you would not have a multiple employer plan.