Assets Sale with SIMPLE IRA Plan
Hello,
I wanted to run the following issue with a SIPLE IRA plan that I am working with:
Scenario:
Company A has a SIMPLE plan. They are purchasing company B as an asset sale (NOT a stock sale). So the employees of company B will be terminated and hired by company A.
Company A wants to stipulate that the years of service at company B will carry over to company A so they can immediately be eligible for the SIMPLE plan.
Is it possible to do this even though the employees are technically new employees of company A?
Thank you.
Permalink Submitted by Alan - IRA critic on Wed, 2021-07-21 18:21
I think so. See Sec 410(b)(6)(C)(i)(II) relating to acquisitions. Basically, if an employee qualified for coverage under predecessor, coverage can continue through a transition period ending at the end of the calendar year following the calendar year of the acquistion. This rule can also be applied should the 100 employee limit become an issue.
Permalink Submitted by Kevin O'Hearn on Wed, 2021-07-21 19:45
Thanks Alan. However would a predecessor relationship apply here? The company being acquired did not previously have a plan in place. Only the buying company had a SIMPLE plan in place. The two companies are separate entities and because its an asset sale, only the assets of the seller are being acquired and the employees would be terminated by the selling company and hired by the buying company. Thoughts?
Permalink Submitted by Alan - IRA critic on Wed, 2021-07-21 20:55
I cannot find specific enough IRS guidance on this question (asset sale and no prior SIMPLE for B). Of course, Company A could simply eliminate their prior year compensation requirement for the 2022 calendar year (for all employees) which would allow the former employees of B to be eligible 1/1/2022. This would be included in the annual Notice due by 11/2. Meanwhile, the referenced employees would have no eligibility for the remainder of 2021.