Controlled Group w/ X-testing issues

[dmb]

I've seen some similar postings but not sure if theyr'e on point.

Employer A maintains Plan X, traditional 15% of pay PS plan, no 401k.

Employer B maintains Plan Y, traditional 401k with match, doesn't make additional ER contr.

Employer A acquires Employer B. Does the controlled group transitional period apply if Employer A changes the PS allocation to a New Comparability design?? If so, does that mean that the 401k provisions can be applied to Employer B without providing such provisions to Employer A and if so desired are employees of Employer B not required to receive minimum gateway allocation due to the New Comparbility allocation of Employer A?? Any help is greatly appreciated.

Thanks.

[Tom Poje]

well, if employees in B received no nonelective contribution to start with, then they would not receive a gateway.

now, if i understand the rules correctly, the transition rule for acquisition applies only to coverage not to nondiscrimination.

however, if each plan maintains a safe harbor formula for profit sharing then I think you get a free pass.

(The sum of 2 safe harbor plans is deemed safe as long as you pass coverage, or something like that.)

however if one of the plans is new comparability then I believe you have to test for nondiscrim using all people.

[dmb]

Since one of the two plans will be a new comparability plan and all people will be included for nondiscrim testing, wouldn't that mean that the minimum gateway requirements would apply to the eligible participants of Employer B??? Thanks.

well, if employees in B received no nonelective contribution to start with, then they would not receive a gateway.

now, if i understand the rules correctly, the transition rule for acquisition applies only to coverage not to nondiscrimination.

however, if each plan maintains a safe harbor formula for profit sharing then I think you get a free pass.

(The sum of 2 safe harbor plans is deemed safe as long as you pass coverage, or something like that.)

however if one of the plans is new comparability then I believe you have to test for nondiscrim using all people.

[Tom Poje]

the regs say anyone who received any nonelective contribution must get the gateway.

if someone did not receive a nonelective (including forfeiture) then that person would not receive the gateway.

so for example, if someone received a 3% safe harbor nonelective, they would get bumped up to the gateway.

however, if someone receives no profit sharing, no forfeitures, even if they had deferrals and a match there is no gateway.