I have been retained by a group of doctors who are merging their two separate medical practices. A new SC is being formed and both the current SC's terminated. I've be told that this is for legal reasons.

Both the current SC's have mpp and p/s plans. My first thought was to have the new SC adopt one the terminating SC's plans, and merge the other two plans. After discussing with the docs, they seem more comfortable terminating all four plans and starting fresh with two new plans for the new SC. Participants could then roll over into the new plans.

Does this make sense to anyone? Would it also work to merge the four existing plans into the two new plans? All plans are standardized prototypes. If termination rather than merger is pursued, should the terminations be filed for approval? Any thoughts would be appreciated. Thanks.

There is no one simple answer to your question. When I deal with situations like this I usually first design the plan or plans the client wants for the ongoing business, and then go back and figure out how to get there from the existing plans.

If the existing plans are as straightfoward as your message implies and the client wants the same pattern of plans going forward (MP + PS), the easiest thing might just be to merge the plans and go forward. This has the advantage of being less complicated and generally less expensive.

However, if the existing plans have significantly different provisions or, as I've seen in some cases, the members of each former practice want to keep existing plan account balances/assets confidential, terminating the plans and then establishing new plans might be appropriate.

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