Seller and Buyer are enterining into an asset deal (substantially all of the assets). Both have 401(k) plans w/ various payment options. The agreement provides that Buyer is not assuming Company A's 401(k) plan, but Buyer will ensure that its plan will accept direct rollovers of accounts from Seller's 401(k) plan with regard to employee that transfer from Seller to Buyer (they will not be in the same controlled group after the transaction).

Sooooooooo,

1. given the changes to the same desk rule (now distributions are allowed from separation of service - and assuming the seller's plan has been modified for this)

2. Given the changes to the protected benefit rules and the direct rollover rules,

3. If Seller gives the employees the option of taking a lump sum or taking a direct rollover to Buyer's plan, an IRA or another retirement plan (so this is a voluntary direct rollover),

is it safe to assume that the protected benefit rules would not apply to the amounts directly rolled over from Seller's plan to Buyer's plan?

I know if there was no transaction taking place - then it would be deemed a direct rollover and no PBs - but I wasn't sure if the fact that there is a transaction taking place would change all of that? Any thoughts would be appreciated!

I was wondering if you could rephrase your question? I'm not clear on the question or what you mean by "protected benefits rule"


Was at least 85% of the assets sold to the buyer? This must be the case in order to allow the distributions. I'm assuming this is the case.

Just curious. If the Buyer is not assuming liabilities, then everyone is going to be paid out their vacation hours? No service will be carried over? Everyone will have a new hire date? This is my thought and I don't think you were asking about this...but if the other benefit programs are being brought in, the 401k should be as well. At least I have never seen it not occur when the other programs are accepted, since they are considered liabilities as well.

nasacremento -- I thought that the 85% of asset sale no longer applies, given the changes to 401(k)(10) and IRS guidance that eliminated the same desk rule.