First Year Safe Harbor 401(k)

[Guest KB]

Plan A is a safe harbor 401(k) plan, effective Jan 1, 2001, sponsored by Company A. Plan year is the calendar year. Company B merges with Company A, effective July 2, 2001. Company B assumes control and becomes named trustee of Plan A. Company B's intention is to merge Plan A into Company B's plan, Plan B. Plan B is not a safe harbor 401(k) plan. Contributions in Plan A are frozen, effective July 31, 2001.

Would Plan A still have to pass ADP test for 2001 since contributions were not made for an entire year in the first year of existence?

[Tom Poje]

I vote YES. As I recall, a plan can discontinue teh safe-harbor match (it still must provide 30 days notice). and at that point, the plan is no longer safe harbor and must pass testing.

Since there was a merger, I believe you have the option of aggregating the plans (both coverage and amounts testing, not one or the other) or use the transition rule that is available.