Discriminatory Timing of Amendment

[jpod]

Here are the facts.

1. Plain vanilla profit sharing plan covers two 414-related employers.

2. For reasons (i.e., multi-state tax planning) explained to me that if true are valid business reasons, client wishes to get the employees of one of the employers completely out of the plan, so that the departing employer will not maintain a 401(a) plan. I am told that spinning off and setting up a clone, separate plan won't accomplish what the client wishes to accomplish. Let's assume client is correct; I'm not sure he is, but let's assume he's correct.

3. We can spin-off the piece of the plan attributable to the departing employees and terminate the spun-off plan. However, that will result in full vesting of the departing employees and all or most of them are HCEs, whereas the remaining employer has a fair cross-section of HCEs and NHCEs.

Will the spin-off termination, which must result in full vesting of the spun-off employees, be an amendment that is discriminatory on account of timing? Client is not willing to fully vest the employees who will be left in the plan.

Any other ideas?