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Possible Year-End Deadline for Retirement Plans of Plan Sponsors Involved in a 2017 Corporate Transaction

Generally, employee benefit plans of members of the same controlled group must satisfy certain requirements of the Internal Revenue Code on an aggregated basis (e.g., retirement plan nondiscrimination and coverage testing). Following a corporate transaction, such as a merger or a stock or an asset sale, the benefit plans of the buyer and seller may differ significantly. In order for plan sponsors to have a period of time post-closing to determine how best to structure their benefit plans going forward, Code Section 410(b)(6)(C) provides transition relief by permitting the plans to choose to be operated and tested separately, if certain requirements are met, such as coverage under the plan not being materially modified during a transition period. The transition period begins on the transaction’s closing date and, generally, ends on the last day of the first plan year beginning after the year in which the transaction occurred or, if earlier, on the date there is a material modification of coverage under the plan. Accordingly, for plan sponsors who underwent a corporate transaction in 2017, the transition period and relief provided under Code Section 410(b)(6)(C), if applicable, ends December 31, 2018, if it did not end earlier due to a material modification of coverage under the plan.

The lawyers of our Employee Benefits and Executive Compensation Practice Group are readily able to assist companies on a nationwide basis with implementing sophisticated benefit plans and providing answers to their most challenging compensation issues. Additionally, our lawyers are well aware of the daily employee benefits challenges facing companies of all sizes and are capable of helping in-house lawyers and human resources personnel with the day-to-day advice and guidance necessary to properly administer employee benefits plans.

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