Plan design - Controlled groups

[Guest nbs]

Employer with 30 employees has a Profit Sharing and Pension plan with 10/31 plan year end. ER does a 25% contribution between the two plans (these are traditional plans). Same ER purchased a new company and owns it 100%. That company has a 401(K) plan (daily) with a 12/31 plan year end and about 250 participants. K plan just has deferrals and match. ER wants to continue to operate the two companies and plans separately and does not want to change the contribution levels (if possible).

The purchase happened last November, so the one year transition provides relief for the coverage, but not the 401(a)(4), correct?

But, I thought you can't test plans together for 401(a)(4) if the year ends are different?

I would appreciate any help on this!

[jaemmons]

The requirement for permissive aggregation is that both plans have the same plan year end. However, in a controlled group situation the plans are mandatorily aggregated anyway for coverage and 401(a)(4) testing. Generally, you would use the the data which coincide together for a respective plan year. For company A's plan you would use the data from company B's 12/31/2001 PYE and 10/31/2002 data from company A's Plan for 2001 testing. For the 12/31/2001 PYE for company B you would use the 10/31/2001 PYE data from company A's plan for 2001 testing. If any of the plan's can stand on their own for coverage purposes, then you don't have to worry about overlapping plan years. However, if they cannot then test to see if the plan's pass the average benefits test. If they can, then you can keep them separate.