Safe Harbor Plan

[PMC]

Employer currently has both a Money Purchase Plan and a 401(k) Plan. They use the MPP to satisfy safe harbor requirements for the 401(k) Plan. Plan years are the calendar year. As of 7-1-01 (mid plan year) they now say they only want 1 plan and want to merge the MPP into the 401(k).

The MPP requires funding the 3% for all eligible employees for the total plan year's compensation. Can they (maybe should is better) even merge the 2 Plans mid-year without jeopardizing safe harbor status for the 401(k)?

Can they fund the 3% nonelective via the MPP up to 6-30-01 and if they do merge, transfer the 3% contribution obligation they had under the MPP for safe harbor, to the 401(k) Plan and still have the 401(k) be considered a safe harbor plan (provided all other requirements continue to be met)? Amendments, final 5500s, 204(h) etc. to be done for the MPP. Change the Safe Harbor Notice to reflect being made to the 401(k) now. Would creating a short plan year for the MPP and the 3% contribution to all eligibles preclude this?

Or, too late - must keep the MPP for the remainder of 2001, use it to satisfy Safe Harbor for the 401(k) and then effective 1-1-02 merge the 2 plans and go Safe Harbor strictly via the 401(k).

2000-3 says guidance is being developed but wondering if others have come across this in the meantime.