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Hiya Folks! The simple answer is yes. However, it ceases to be a 412(e)(3) plan at that very moment; it becomes a regular old DB Plan, with all of the minimum funding rules, Fiduciary rules, tax rules, compliance rules, etc. You would probably need a new Plan Document at that moment, too. As an aside, I rarely find one of these plans that is compliant, and this is a good chance to bring it into compliance, assuming the client will pay for what a DB Plan costs when someone is actually doing the work.

Mike are you saying 412(e)(3) plans are a disaster?

I was able in a similar situation to get a proposed $55,000 DOL penalty reduced to $5,000. The legal fees exceeded $5,000, let alone $2,000.

If each of the plans independently passes 410(b) on the basis of all employees in the controlled group, then non-discrimination testing is done independently. Keep in mind that 401(k), 401(m), and non-elective contributions are each deemed a separate "plan" for 410(b) testing. If the 410(b) testing cannot be passed as described above, then the issues become complicated.

Thanks, all, for these helpful responses. I'll report back after I contact the couple of trade groups mentioned by Bob.