Controlled group one year but not the next

[Santo Gold]

An individual owns company A which has a 401(k) Plan and in December 2005, the same individual buys 85% of company. We have a controlled group, but the transition rule allows exlcusion of Company B's employees through 12/31/06. A plan amendment is done so that Company B's employees are excluded from the plan, but we know that they must be counted for testing, starting 1/1/07.

By the end of 2007, the owner of company A is expected to decrease his ownership in Company B, to less than 80%. There are no other common owners. Ownership is expected to stay below 80% thereafter.

Is it correct that starting 1/1/08, there is no longer a conrolled group and we can ignore Company B's employees for testing purposes of the Plan? Also, if Company B started its own 401(k) Plan on 1/1/08, there are no combined issues relating to both plans. That is, because there is no controlled group, the plans are tested separately, no reason to look at employees of the other company.

Thanks