Comp. A & Comp. B co-sponsor a 401k plan. Comp. A stock is sold to Mega-Comp. C on 4/1/06.

Comp. A's Board, on 3/31/06, passed a resolution saying, "the Company will cease to be a participating "Employer" in the Plan effective as of the close of business on March 31, 2006".

I don't think that created a "distributable event" for the employees of Comp. A because it was not "termination of the plan" before the sale.

Am I correct? Or would this allow for distribution of 401k money for employees of Comp. A now working for Mega-Comp. C?

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I think that to allow for distributions they would have had to spin off one of the companies (A or B) from the A+B Plan and then A could have terminated pre-sale, thus allowing for distribution of assets. Without the spin-off, if plan terminated and distributed $, Comp B. would not be allowed to have a plan for a year.

Right?
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Is there any issue with a Trustee-to-Trustee transfer of the money from the A+B plan to the Mega-Co Plan now that Comp A is not a participating employer in the A+B Plan? (Although I don't know where else the money can go.)

Thanks

This is kind of the exception to the rule. Since the plan was the “AB Plan” and NOT the “A Plan”, it would create a distributable event at the point when Company A stopped participating in the AB Plan.

I believe since the resolution to stop participation in the AB Plan was already completed, that a trustee to trustee transfer could NOT be done. Participants would have the choice whether to roll their balance into the new plan or not.

Great. I can take that to the bank, right?

thanks for taking the time.

It's definitely a distributable event (General Counsel Memorandum 39824 of 1990).

Thank you again.

Awesome citation.