Team members are free to choose whatever armies they would like, but all regular rules for governing allies apply. Come the Apocalypse alliances will be played exactly as stated in the rulebook. Example: Player A cannot deploy within 12" of Player B (or whatever the restrictions are).
this makes me sad. i'm not suggesting you change it for this particular event, but i've mentioned this before: i think it sucks to penalize people for playing the army they own with someone they actually want to spend ~8 hours playing games with (presumably one of their friends) because they didn't choose to play non-cta armies X years ago when they started playing the game.
i notice this in particular, because i play tyranids. none of my friends have tyranid armies, so short of lending one of them some of my stuff, i pretty much have to take the come the apocalypse penalty if i want to play my own models.
edit: just to be clear since the above may have come off as more whiny than intended
it's really not that big a penalty and i've played around it before and will likely do so again, it just seems to me that it's and unnecessary barrier to people being able to play the army they have with the people they want to play with