Company A (large national co.) ownes company B. Company B acquires company C through asset sale. Company B also owns Company D which will merge with company C to become Newco. All companies have 401(k) plans which Newco can adopt or merge assets into. If Newco continues with Company C existing plan, TPA says it will only require an Amendment to plan to change name, tax ID, waive 90 day waiting period for Company D employees.

Assuming Company C is the one chosen, given the new name & tax ID, can current participants be given the right to take a distribution at time of transition? What are employee rights at a time like this?
If Newco goes with either Company A or B plans, can Newco force all existing participants in C & D to merge into the chosen plan?

From what I have read, if the plan is terminated, employees have option of distribution or rollover into qualified plan. But if plans merge, the rules change? How does same desk rules apply here.

I am very new at this and have been asked to participate in the discussions as the "employee voice" and just want to make sure I have a full understanding.

Thanks in advance for your help!

If company B acquired company C in an asset sale, Company B does not automatically assume responsibility for the plan that was sponsored by Company C prior to the sale. Unless the purchase agreement states otherwise, Company C is responsible for terminating the plan. The employees from Company C have a severance from employment with regard to Company C and, if the plan allows distributions upon severance from employment, can take a distribution.

If "NewCo" does as you say and becomes the successor plan sponsor for the Company C plan, then the new employer has assumed responsibility for the plan and the Company C employees are no longer considered to have a severance from employment with regard to Company C. The new employer also assumes responsibility for anything that happened in the plan prior to the date they became successor plan sponsor. This is why in asset sales the new employer generally does not want to assume responsibility for the seller's plans as part of the transaction.

From an employee standpoint, I do not see an advantage or disadvantage either way unless there are provisions in the Company C plan which the employees do not like (which can probably be changed by just a plan amendment).

But from an employer standpoint, I would make sure that due diligence is done before assuming responsibility for Company C's existing plan to ensure there are no issues which could come back to haunt the new employer down the road.