controlled group and ADP testing

[eilano]

Company A was purchased by Parent Company XYZ on 8/30/04. Company A sponsored a 401(k) plan with a December 31 plan year end. Parent Company XYZ also owns Company B which sponsors a 401(k) plan also. For 2004 ADP testing purposes, can the ADP test include just company A employees?

[MWeddell]

The Company A employees are still in a separate plan, right? Yes, they can be treated separately for ADP testing assuming they also are treated separately for coverage and other testing purposes.

[eilano]

Yes, company A is still in a separate plan. Thanks for the info.

[JanetM]

Under transition rules you don't have to worry about control group issues until plan year beginning 01/01/06. You have until end of plan year following year of acquistion before you have to apply control group rules.

[Belgarath]

I agree with Janet that this COULD be available. And usually is. But I'd caution that some documents are set up so that this isn't an automatic pass. For example, some are set up to default where the other business is automatically included - they would have to specifically elect to exclude employees acquired in a 410(b)(6)© transaction. Problem with this is that it is often too late to exclude them by the time the client thinks to notify the friendly and cooperative TPA.