Using 3% NHCE ADP for first year of plan

[maverick]

Situation:

- Corporation has 3 divisions (SC, IL, and GA), each of which has a 401(k) plan.

- Corporation establishes a new "USA" 401(k) plan in 2002

- Assets of each division plan are merged into new plan at different dates during 2002

Can I use use 3% NHCE ADP for testing the USA plan in 2002?

The PPD ERISA outlines says "For the first plan year of a plan (other than a successor plan) that used the prior year testing method, the ADDP of the NHCEs for the prior year is deemed to equal 3%" I'm not sure of the definition for "successor plan".

I have a student edition of Sal's ERISA outline, but the C-1 version omits sections on ADP testing.

If 3% can't be used how in the heck do I come up with an ADP for the NHCEs? I remember reading something a long time ago that the NHCE ADP would not be the average of the actual prior year ADP for the 3 plans, it would be a weighted average. For example:

SC plan 2001 NHCE ADP: 4%, 100 NHCE (100/450 * .04 = .0088)

GA plan 2001 NHCE ADP: 2%, 300 NHCE (300/450 * .02 = .0133)

IL plan 2001 NHCE ADP: 6%, 50 NHCE (50/450 * .06 = .0066)

weighted average: (.0088 + .0133 + .0066) = .0287, 2.87% compared to

average of actual prior year ADP (.04 + .02 +.06)/3 = .04, 4%

Any ideas? Thanks.

[alanm]

It would be a successor plan and the weighted average would come close to the correct %.