Safe Harbor & Peo

[Guest ANNEBV]

My client is a PEO. The PEO has a new client organization (CO) that is adopting the PEO's 401(k) plan. The CO has an existing 401(k) plan with another PEO. It is a safe harbor plan. They are merging the "prior" plan into the current PEO's (my client) plan.

Questions:

For purposes of safe harbor and the notice requirement, is there a notice requirement in the "new" plan?

assuming the notice requirement was satisfied in the "prior" plan, is this sufficient for purposes of the "new" plan?

if not, and there IS a notice requirement for the "new" plan, then what is it? i've read the ERISA Outline Book and it just doesn't hit home with me. something about by the effective date of the new plan? meaning the date the participation agreement was signed or the date deferrals begin?

I hope someone can offer some help!

[Guest dbvail]

To say this is a gray area is understating the point, but I'll give you my thoughts. In the case of a PEO we are treating the recipient employer, not the PEO, as the plan sponsor for most purposes. If we follow that logic? then there is no 'old' or 'new' plan, rather, the adoption of a new document to continue salary deferrals of the 'employees of the employer'. In your case, all the notice requirements for this employer have been met.

Aside from the 5500, all testing etc. is at the recipient employer level, the use of the PEO's document via joinder agreement is an accomodation in the spirit of reduced costs etc.

I am comfortable with this arguable position, but am always willing to hear if firm(ish) guidance is on the horizon.