adding 401(k) and safe Harbor

[Earl]

Plan had a 401(k) feature but was amended in December 1998 to remove it, effective 1/1/99. 401(k) money still in the Trust.

Can the plan add a 401(k) feature now and use a safe harbor in 2003?

[Tom Poje]

well, now isn't that interesting. based on the Notices it looks like it should be possible

Ntice 2000-3

the requirements of section V of Notice 98-52 will be treated as being satisfied for the entire plan year and the CODA will not be treated as failing to satisfy the requirements of section X of Notice 98-52, provided (1) the plan is not a successor plan (within the meaning of Notice 98-1), (2) the CODA is made effective no later than 3 months prior to the end of the plan year, and (3) the requirements of Notice 98-52 are otherwise satisfied for the entire period from the effective date of the CODA to the end of the plan year. Thus, an existing calendar-year profit-sharing plan that does not contain a CODA may be amended as late as October 1 to add a CODA that uses a 401(k) safe harbor method for that plan year.

and Notice 98-1 says

For purposes of this notice, a plan is a "successor plan" if 50% or more of the eligible employees for the first plan year were eligible employees under another section 401(k) plan (or section 401(m) plan, as applicable) maintained by the employer in the prior year. For example, in 1998, Employer H sponsors Plan T, a section 401(k) plan. In 1999, Employer H establishes Plan U, also a section 401(k) plan, which had 200 eligible employees, including 100 employees who were eligible employees under Plan T in 1998. Plan U is a successor plan.

[Earl]

Thanks - I'm thinking that I am going to go with it. Interesting though because I have to argue that a (restated) plan is not a succesor plan to itself (with regard to the 401(k) feature).