Definition of "successor plan" as mentioned in Notice 98-52

[chris]

E/er has 401(k) plan which e/er said would be terminated as of 12/31/03. E/er wanted to set up safe harbor 401(k) effective 1/1/04 but did not want to amend the earlier 401(k) plan. Now e/er says that the old 401(k) was never terminated. Clearly there are operational issues with the old 401(k) if the e/er has not been following the plan document. Assuming a proper resolution to terminate was adopted, is there any way to address the "successor plan" issue in 98-52 in regards to setting up a new safe harbor 401(k) effective as of 7/1/04, e.g., set up new profit sharing plan effective 1/1/04 and then amend that PSP effective 7/1/04 to add safe harbor 401(k) provisions....??

[E as in ERISA]

Don't you have to wait at least a year after the final distribution from the old 401(k) before setting up the new 401(k) in order to avoid successor status?

[chris]

Sal Tripodi's book refers you to the guidance in Notice 98-1 which states that if the plan is one under which at least 50% of the eligible employees were eligible in the prior year for another 401(k) plan maintained by the employer then it is a successor plan..... Other than being one step removed, the new PSP amended to safe harbor 401(k) would appear to still be subject to the successor plan rule.....???

[k man]

the successor plan rule still applies with respect to distributions. thus you would not be able to distribute from the original non safe harbor plan. you would have to merge the two plans.