Mid-Year Termination of Safe Harbor 401(k) Plan

[Guest renhark]

Company A sponsors 401(k) safe harbor plan. To satisfy 401(k) safe harbor requirements, plan year must be 12 months; in this case, it is (7/1-6/30). Safe harbor satisfied by 3% nonelective contribution.

Company B intends to purchase the outstanding capital stock of Company A before the end of the current plan year. Company B sponsors a 401(k) Plan that is not a safe harbor 401(k) Plan and it is a calendar year plan.

If Company A does not terminate safe harbor plan prior to the date of the corporate-level transaction, then the Company B KPlan will be a successor plan, and distributions of 401(k) dollars (and safe harbor nonelective contributions?) cannot be made to former participants in Company A Plan that are current employees of Company B.

Treasury Regulations allow you to get around the 12-month plan year requirement if the safe harbor plan is terminated if the plan satisfies the 3% contribution through the date of termination and either --(i) the plan would satisfy the requirements of paragraph (g), treating the termination of the plan as a reduction or safe harbor matching contributions. other than the employees having a reasonable opportunity to change their cash or deferred elections and, if applicable employee elections; or (ii) the plan termination is in connection with a transaction described in Section 410(b)(6)© of the Code....

Can Company B elect to "terminate" the Plan as of the effective date of the corporate-level transaction and merge the full account balances of participants in Company A's plan (including other non-safe harbor contributions) into its 401(k) plan? or does Company A have to terminate its Plan before the stock sale and distribute account balances to Plan A participants?