Transition Period for Acquisition

[Gilmore]

A 401(k) Plan has been deemed to pass coverage due to the fact that no HCEs participated in the Plan. The Plan excludes a certain classification of employees.

The Plan Sponsor is being purchased, and one of the new owners is an existing participant, who will become an HCE due to his new ownership. The effect of now having an HCE participating in the plan will mean that the exluded class of employees will cause the plan to fail coverage testing.

If the Plan is a calendar year plan, and the purchase is effective during the plan year, would the transition period for an acquisition apply in this case, and if so, would the Plan continue to be deemed to meet coverage for that plan year and the following plan year?

Thanks.