SARSEP and Profit Sharing

[Guest Suanne]

A client currently has a SARSEP. They are adopting a new comparability profit sharing plan for 2005, with plans to change it to a safe harbor 401(k) plan for 2006.

1) For 2005, are the SARSEP deferrals included in the average benefits test when performing 401(a)(4) testing?

2) If they had adopted the profit sharing plan earlier in the year, could they have made it a 401(k) plan using prior year testing, and allowed the HCEs to make additional deferrals into the 401(k) plan (even though they were limited in the SARSEP plan)?