adp test, new plan spin-off

[Guest carsonv]

I have an interesting situation. During 2002, Company S had a 401k plan-not safe harbor. On Dec. 23 of 2002 Company G started a new 401k plan. At that time all of the employees of Company G had been participating in Company S's Plan. All of the participants moinies were moved from Company S to Company G early in 2003. Deferrals did not start for Company G until early 2003 also. The 2002 5500 for Company G was a bunch of zeros.

Company G's document says they use the prior yr testing method. There are not any prior yr numbers to use because they did not defer from Dec. 23-31. I am hesitant in using the deemed 3% because 2003 is not the first yr of the plan.

Basically, I am trying to find out how much the HCE's of Company G can defer for 2003. They use the prior yr testing method so what numbers do I go by????

Any help would be greatly appreciated.....

Thanks,

Carson

[Guest pjb]

Assuming this creates two separate unrelated employers, I believe the new plan couldn't be treated as a successor plan. You have a short plan year from 12/23 to 12/31?

If there were no contributions to the plan for the short plan year, can we amend the plan to a 1/1 effective date? I assume all of the employees have predecessor service counted for eligibility and vesting, so what can it hurt.

Just because the company spin-off occurs occurs on 12/23, doesn't mean the new plan must be coincident with that date.

[Guest carsonv]

I was thinking that I should use the adp % from Company S for that year. The Company G EE's had deferrals in company S's plan until Dec. 23, 2002.

What are your thoughts about this