MP Plan Merger and Plan Year Change

[MBCarey]

We have a client who has maintained two plans, a mp plan with a 10% contribution and a ps plan with no employer contribution. We merged the two plans 1/1/2003. Both plans had a plan year of 10/01-09/30. This has been changed with the merger to a calendar year plan.

I believe that we are obligated to make the 10% contribution for the short plan year from 10/01-12/31. We are using the compensation for 10/1-12/31 to determine the required contribution. The HC in this plan received the max. $17,000 for the 2001 plan year which ended 9/20/2002. If a 10% of this short period compensation is given to him, would that contribution be counted in the calendar year for the short plan year or would it have to be counted in the 2003 year when the two plans were merged. Would we base the contribution on what he actually earned in this quarter.

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The 10% contribution is continuing to be given in the profit sharing plan fso no loss of benefit occurred. We are just trying to determine if we would be letting the HC receive more than he should either in the year 2002 or 2003?

Also, since the eligible compensation went from 170,000 to 200,000. Should we use $200,000 to determine 10%. His reported income for that short period is over $70,000. I don't think we can use 10% of that.

Sorry if this is confusing