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LisaS

Safe harbor plans leaving and joining MEPs

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I have two separate situations with a safe harbor plans: one that is trying to join the MEP and one that abruptly left and went to a large national payroll company. The first plan is a safe harbor plan that is being administered by a national payroll/benefits company. They were informed that the plan was leaving and stopped accepting payroll contributions in November. I am trying to contact the payroll company conversion specialists and ask if this is a fact. Because this is a safe harbor plan I thought we should merge the plans effective 1/1/2018 but the advisor wanted to start the plan 12/1/2017 because of this situation.   Should we make a quick amendment to allow contributions to trustee directed (i.e. pooled) and set up a checking account in the name of the plan so we have somewhere to hold the assets? 

The other safe harbor left the MEP abruptly in November 2017. I have contacted the client and asked if the payroll company he went to had provided any consulting about the impact on the safe harbor but have had not response. 

Any advice would be appreciated.

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Welcome to BenefitsLink.

There is no guidance, either formal or informal, regarding mergers or spinoffs of safe harbor plans.  There was a section for it in the 2006 final regs, but it only said "reserved".  In absence of guidance, a reasonable, good faith interpretation of the code is your best option.

It would be helpful to know your role in this.  It may affect the advice you will get from others.  You'll also want to keep in mind that whatever route they take, they will need cooperation from the new service providers and probably the old ones, too.  If the new service providers don't have someone qualified to assist them, the plan sponsors may want to reconsider their choices. 

We have, in the past, handled similar situations and continued the safe harbor for the participants for the entire plan year, with the understanding that we might have to justify it to the IRS at some point.  That's a judgment call and not everyone will make the same decision.  Hopefully, we can get a discussion going.

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