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Merger of two safe-harbor plans, different formulae


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Plan with a 3% non-elective SH wants to merge with safe-harbor plan with basic SH match. Under IRS guidance re: mid-year amendments to SH plan, you can't change the SH type mid year. Can these plans merge? Does their merger mean the plan will lose SH status for 2016 year and be subject to testing?

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Well, Zorro, as I understand it, employees from Company A will become participants in the plan of Company B after the merger. If that is the case, you can treat a SH plan as terminating and preserve SH status for certain business transactions (including mergers and acquisitions). You can also merge a terminated plan into an existing plan. Therefore, you can terminate Company A's plan, preserve the SH because of the merger, and then Company B's plan operates with the new participants effective as of the date of the merger.

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  • 2 months later...

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