TRDriver

Thank you for the responses. Splitting by last name seems risky to me as one or the other plan could become large quickly just by virtue of new hires' last names. Any thoughts on what type of communication would be required to the participants (a new plan is not being created, just participants being moved between two existing plans)? I thought perhaps a black out notice would be needed, but as suggested by the recordkeeper, if they can do a plan-to-plan transfer, then perhaps one is not required because the movement doesn't take the balances out of the market for more than 3 days?

May I ask what the business criteria were? Maybe I'm missing a viable opportunity to add the third plan... Thank you.

While I know there is opinion that separating a 401(k) plan into two plans solely to avoid large plan/audit status may not be an acceptable reason to create a second plan, we did this for a client several years back. In 2012 we spun off to a new plan those hired on or after 1/1/2011. Those hired before 1/1/2011 remained in the existing plan. We have tested the two plans together in all years (they are ADP/ACP tested plans with all of the same provisions). We are now to the point where the second plan is reaching large plan status. The client asked if we could split that plan into a third plan, but I told them I didn’t think that was a good idea. Instead, we are exploring the idea of “rebalancing” the two existing plans, changing the plan eligibility from the 1/1/2011 hire date to a 1/1/2019 hire date. In essence, we would be moving all those hired between 2011 and 2018 from the second plan to the first plan, which would reduce the count in the second plan thereby allowing it to grow again. Has anyone ever done anything like this? The recordkeeper for the plans (Empower) is saying they would simply do a plan to plan transfer (since it's one company) and so no black out notice would be needed, but I feel like it is a bit more involved than that. Any thoughts/advice would be greatly appreciated. Thanks in advance.