Mid-year safe harbor rules

[Guest PJTEN]

Hi All,

I have two clients which plan on merging within the next couple of months. Company A does not have a retirement plan and Company B has a 401(k) plan.

Upon merging, they wish to maintain one safe harbor plan. I don't think that Company B can convert to a safe harbor plan mid-year because it was a straight 401(k) and not profit sharing plan. Does this make sense?

If that can not be done, Company A would like to start up it's own safe harbor plan mid-year and then merge merge the two plans. Can this be done?

Thanks

[Archimage]

I would agree. You could start a new plan for one company and it be safe harbor but the other one is stuck for the rest of the year. I think you would have to wait until 1-1-2008 to make one whole safe harbor plan.

[Tom Poje]

and apples and oranges don't mix. you could not combine the ADP tests for testing.

since you get a free 3% look back for the first year of a plan, I've seen it recomended to use prior year testing the first year in the new plan, then combine the plans at the start of the new year and go safe harbor.