Into the PEO

[Guest Mike Schwing]

I have an employer who had their own 401(k) plan through 06/30/02. They became part of a PEO and it's multiple employer plan on 07-01-02.

When performing the ADP / ACP testing for 2002 do they have two tests or one?

I don't have all the info. on the change but they instructed us they merged into the PEO's multiple employer plan in mid year.

I'm of the opinion its the employer's plan and all contributions for the entire year must be tested as one, but I'm not sure becuase they left to go to the PEO and adopted thier plan. The PEO is telling them to have us test the first six months and they will test the last six months. I may be way off base but this doesn't seem right to me.

They are also top-heavy for 2002 and I would certainly think they are required to make a top-heavy contribution for the full year.

Any thoughts would be appreciated.