controlled group inclusion, with a twist

[Santo Gold]

On 1/1/07, 100% Owner of Company A buys 85% of Company B. Company A and B have roughly the same number of employees. Company A has a 401(k) plan, company B does not. For coverage testing, I believe the transition rules allow for the exclusion of Company B through the 2008 plan year. They have to be counted for testing in Company A's plan starting 1/1/09.

Company A would like to allow Company B employees to make 401k contributions now in 2007, but would want to keep them out of the match and profit sharing until allocations until 1/1/2009. Can they pick and choose which plan components to have the transition period apply too, or is it all or nothing?

Thanks

[Mike Preston]

All or nothing.

[JanetM]

So let them in but have two years of service to recieve company contributions. Would have to be 100% vested. Or start separate plan with deferral only and then merge the two 1/01/09.