Adding 401(k) Provision

[pmacduff]

I have a Profit Sharing Plan with an April 30th plan year end that coincides with the Company's fiscal year. The plan uses prior calendar W-2 wages for the compensation definition. The Employer is tossing around the idea of adding a 401(k) provision to the Plan. Due to the demographic of the Company, I would recommend that the client utilize the safe harbor matching provision to get a pass on the ADP/ACP tests and allow the highly comps to defer the max. (They will be lucky to get anyone in the lower group!) Can the plan continue using the definition of comp as prior calendar year W-2 when they add the 401(k) provision? Is it an issue that the data used for the 2004/05 plan year will be 2004 calendar year info with deferrals only from May - December? Must/Should I recommend that the client change the plan and /or limitation year? Am I overanalyizing this??? Thanks in advance.