Leaderboard

I think you're looking for Sec. 6.02(5) which says: You can use a reasonable estimate of the investment results, including the results of the DOL calculator, only if "it is not feasible to make a reasonable estimate of what the actual investment results would have been." In my opinion if you have the data it is feasible to calculate, even if it might be time consuming to do so. Check Appendix B section 3.01(3)(b) and (c) for simplifying assumptions which might make your life a little easier. Of course, you can still rely on the DOL calculator if you correct under VFCP.

OK, thanks, Bill. And thanks, Kevin C.

I agree with this description of what the seller could have done prior to the sale and that more options would have been available prior to the sale. But, the transaction the OP describes has already happened. First of all, the IRS has never issued guidance dealing with mergers of safe harbor plans. 1.401(k)-3(i) was originally reserved for it. But, it just says Reserved. For those who think 1.401(k)-3(e)(4)(ii) doesn't apply after the transaction has taken place, what do you see that indicates this is only available before the transaction? With no guidance available, our only choice is to use a reasonable, good faith interpretation of the code and regs. Let's change the OP situation a little. Suppose after A closes on the stock purchase of B, that A terminates Plan B shortly thereafter. Plan B will have a short final year due to the plan termination and it looks to me the termination was in connection with a transaction described in 410(b)(6)(C). So, under 1.401(k)-3(e)(4), it can be safe harbor for the final year. But, wait. Under 1.401(k)-1(d)(4), Plan A is considered to be an alternative defined contribution plan of the "employer" as of the date Plan B is terminated. That means the plan B termination is not a distributable event. So, what happens to the balances of the active participants in Plan B? While the regs don't directly address it, if Plan B is going away and you can't distribute the balances of the active participants, I don't see any option other than merging their balances into Plan A. I don't see anything in 1.401(k)-3(e)(4)(ii) that says it doesn't apply if any of the balances can't be distributed due to the plan termination. So, I don't see that it is affected by the balances going to Plan A after the plan termination. The big question is do you get the same result in the very similar situation of Plan B being merged into Plan A after the stock purchase? With no guidance on merging SH plans, it's a judgment call.