Transition rule under 410(b)(6)(C)

[buckaroo]

I have a client that is part of a controlled group.  There are two members of the controlled group:  Company A and Company B.  Each Company maintains their own profit sharing plan.  They are able to pass coverage annually under the ratio test, taking into account the employees from the other company in the coverage group.  They did so for the 2017 year.  In 3/2018, Company A acquires Company C via a stock acquisition.  Now, all three (A,B,C) are members of the same controlled group.  For the 2018 year, they are looking to take advantage of the transition rule.  My question is:  Does the transition rule dictate that the plans for both A and B are automatically deemed to satisfy coverage (assuming that no significant changed during the transition period) and no coverage testing is required at all OR does the coverage testing still need to be run for the plans of A and B taking into account the employees in A and B and not C? 

Thanks in advance. 

 

[Belgarath]

The latter.

[Bill Presson]

1 hour ago, Belgarath said:

The latter.

I fully agree that this is the intent of the rules. But I've heard some people much smarter than me say it actually allows the former.

[Belgarath]

Well, that's a good point. The Code does say "any" plan covering employees of such person or any other member of such group...

I was going to get Thai food for supper, but perhaps I'll try a little crow instead.

[Bill Presson]

38 minutes ago, Belgarath said:

Well, that's a good point. The Code does say "any" plan covering employees of such person or any other member of such group...

I was going to get Thai food for supper, but perhaps I'll try a little crow instead.

Oh, please don't. Not sure I would want to defend intentionally doing it. But I like keeping it in my back pocket in case I ever need it.

[buckaroo]

Thank you for the replies.  I am also not seeing this as clear cut, but I wanted to see if anyone else thought it was.  I also think the spirit of the law was the second option, but I can see where folks could justify the first option.  Does anyone have any other thoughts on this one? 

All opinions are appreciated.