"A" and "B" (both corporations) constitute a controlled group of corporations. "A" sponsors a qualified retirement plan. "A" has authorized "B" to adopt "A's" plan and "B" has done so.

Due to a change in ownership, as of June 1, 2006 "A" and "B" ceased to constitute a controlled group of corporations. "A" and "B" do not wish to co-sponsor what would now be a multiple employer plan. "A" wants "B" out of "A's" plan and "B" wants to terminate its portion of "A's" plan.

Does anyone know the steps "A" and "B" must take in order to bring about the desired result?

A consultant has recommended that "B" implement its own plan and then spin-off the assets in "A's" plan attributable to it into the newly-established plan (and then terminate the newly-established plan). This seems unnecessary.

You have it right IMHO. Simple to do, A does resolution ensuring that B does not participate. New plan is formed to accept transfer of assets. Then terminate the plan and allow cash out or rollover.

Your problem is that the B folks don't have a distibutable event so they can't take the funds from As plan.

Not sure what type of plan A & B maintain. Different rules apply to different types of plan.

Basically, my opinion is that consultant is right -- you cannot terminate part of the plan. Note that the IRS 414(l) regs treat a spin off and a transfer of assets or liability differently. A spin off is the splitting of one plan into two or more plans. A transfer of assets and liability is treated as a spin off from one plan and a merger of the spun off plan into another plan. Same result, but different paper work.