ADP/ACP question

[fiona1]

Does anyone have any idea how you test a plan that is part of a controlled group for part of a year?

For example, Company X, Company Y and Company Z are part of a controlled group. They each have a 401(k) plan and they are tested together for 1/1/04 to 12/31/04. But on 8/1/05, Company X is purchased by an unrelated employer - so they are no longer part of the controlled group on 8/1/05.

For 2005 testing, would you:

a) Test X, Y and Z together from 1/1/05 to 8/1/05. Test Y and Z together from 8/1/05 to 12/31/05. Then test X separately from 8/1/05 to 12/31/05?

b) Text X, Y and Z together from 1/1/05 to 12/31/05 - but only testing the comp and contribs of X from 1/1/05 to 8/1/05. Then test X separately from 8/1/05 to 12/31/05?

c) other options?

Thanks for any help.

[Trekker]

In 2001, we had a similar situation and asked the IRS for a general information letter advising the preferred method for testing a plan whose sponsors were members of a controlled group for part of the year and not a controlled group for the balance of the year. The IRS replied that there was no law on this particular point and, therefore, they would not offer guidance.

I think we ended up treating employees of the company that left the group as terminated.

This may not match your situation, but the IRS offered no guidance on ours.

[fiona1]

Thanks Trekker