HCE Determination - M&A

[Guest Mark Draa]

I'm doing the 410(B) test for a terminated plan that was originally sponsored by a company that was acquired (stock sale). A portion of the excess assets were allocated to the active employees, with the remainder reverting to the new (acquiring) employer. Those employees who received an allocation of excess assets obviously benefitted for the year.

Let's say the acquisition was 8/1/99, and I'm doing the (calendar year) 2000 410(B) test for the entire group. In determining who is an HCE, I need to look at compensation during the lookback period. Can I use compensation for the entire 1999 plan year for this purpose (which would include 7 months of compensation paid by the prior employer and 5 months paid by the new employer).

1.414(s)-1(f)(1), (2) & (3) would appear to say yes. This is a large group (~3000 employees, ~100 HCEs) and passing or failing 410(B) hinges on this question.

TIA for your opinion!

Mark

[Guest merlin]

Why can't you test the two groups separately? It would appear from the dates that you can use the special rule of 410(B)(6)© through 12/31/00.Does this help?