Catch22PGM Posted January 4, 2022 Share Posted January 4, 2022 Company A and Company B are both corporations owned 100% by Fred so we obviously have a brother-sister controlled group. Both Company A and Company B sponsor 401(k) plans - both have 12/31 PYE, same HCE definition, and current plan year testing for ADP/ACP. Historically the Company B 401(k) plan has failed coverage testing so the plans have been aggregated to pass coverage and ADP/ACP. Fred sells 100% of his stock in Company B to his best friend Barney on December 1, 2021, so there is no longer a controlled group. Nothing else changes other than the stock ownership and there is no affiliated service group. 1. Are the employee populations of Company A and Company B required to be combined for coverage in 2021? 2. If they aren't required to be combined, can the plans be permissively aggregated for 2021 (and 2022 if desired)? I assume 1 is no and 2 is yes since the 410(b)(6) transition rule allows the parties to a stock acquisition to test their plans for coverage and nondiscrimination purposes as though the transaction did not occur, but I'm just not 100% confident in my thinking... or there was too much holiday cheer last week and my brain still isn't functioning properly. Link to comment Share on other sites More sharing options...
Luke Bailey Posted January 6, 2022 Share Posted January 6, 2022 1. Plans are required to satisfy 410(b) each day in plan year or on one day in each quarter, or on last day of plan year (1.410(b)-8). Per your facts, Catch22PGM, they would not pass for periods before 12/1 without aggregation, so I think you will want to aggregate for period before 12/1/2021. After 12/1 they can't be aggregated, since different employers. 2. If the plans satisfied coverage on 12/1/2021, including by aggregation, they should be good through 12/31/2022 as long as coverage not significantly changed. 410(b)(6)(C). Catch22PGM and Bill Presson 2 Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034 Link to comment Share on other sites More sharing options...
Catch22PGM Posted January 6, 2022 Author Share Posted January 6, 2022 Thank you Luke Bailey - your insight and explanations are always appreciated. Link to comment Share on other sites More sharing options...
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