New plan for 401(k) safe-harbor adoption?

[Guest jody303]

My question concerns whether or not a 401(k) safe-harbor plan can be adopted for 2003 (say, April 1, 2003) under the following circumstances.

S-Corp A currently sponsors a PS plan. S-Corp B currently sponsors a non-safe-harbor 401(k) plan. A and B are unrelated. Two new entities are being formed: LLC C and LLC D. S-Corp A will own 50% of each new LLC and S-Corp B will own 50% of each new LLC. Because of this ownership, LLC's will be a controlled group.

All S-Corp A employees will no longer work for S-Corp A. All will work for LLC C, effective March 1, 2003. All S-Corp B employees will no longer work for S-Corp B. All will work for LLC D, effective March 1, 2003. The new controlled group (LLC's C and D) wants to establish a 401(k) safe-harbor plan, effective as of April 1, 2003. It is contemplated that the existing PS and 401(k) plans will be merged into the new 401(k) plan some time this year.

Are there any problems with this approach? Specifically, because S-Corp B already sponsors a non-safe-harbor 401(k) plan, does this preclude the adoption of a safe-harbor 401(k) plan in 2003 for the new entities? If the plans weren't merged, would the result be different?

Please keep in mind that we know that neither of the existing S-Corps will form a controlled group with each other or the new LLC's. Also, all existing and new plans have/will have calendar fiscal years.

Thanks in advance for all comments.