All of the pre-acquisition subsidiaries of a bank holding company are covered under one discretionary profit sharing plan. The Holding company has acquired a new subsidiary bank that has two plans: (1) money purchase pension plan and (2) 401(k) Plan.

The Holding company desires that all employees of all subsidiaries be covered under the existing discretionary profit sharing plan. The Holding company would also like to establish a 401(k) plan. The current Holding company profit sharing plan's assets are held by a trust. The assets of the acquired bank are all held in insurance contracts.

Even though there is a money purchase plan in the acquired bank, is it corect that the assets of both plans could be (1) merged into the discretionary profit sharing plan or (2) merged into the discretionary profit sharing plan and/or the new 401(k) plan ?

If the insurance contracts have termination fees, could that be mitigated by freezing the plan until those charges are no longer significant, while allowing the acquired banks employees to participate in the holding companies profit sharing and 401(k) plan or would you go ahead and merge while holding the insurance contracts as a seperate assets class until termination fees have lapsed ?

You have a minor problem with mulltiple potential solutions. The MP plan can be merged into the PS plan. The 401k plan can be added as a new plan (with the existing 401k plan of the acquired subsidiary merged in), or the existing 401k plan amended and expanded to include all employees.

Can we assume this should refer to the assets of the plan rather than the bank?

If it were me, I would leave the MPPP separate and freeze it. Amend to 0% contributions. This will prevent any issues with J&S benefits attached to MPPP.

You can add 401K to existing PS plan, amend to cover all employees. Then merge the new companys 401K into the holding companies plan.

[A version of this was originally posted in the Plan Termination board]

Please see IRS Revenue Ruling 2002-42 (and cites within that Ruling) in regards to the proposed plan merger question.

In addition, the corporate merger and acquisition documents often provide guidance as to how the target's benefit plans will be maintained or amended, i.e., full vesting, freezing, merging, etc.

If the target's plans are top-heavy and frozen, consideration should be given to whether any minimum benefits/contributions would still have to be provided........