Permissive Aggregation for Coverage Test

[flosfur]

One man-corp A has a DB plan covering the owner X with PYE 09/30. The owner X was less than 80% owner in another corp B (with 20+ employees) which has a DC Plan with PYE 12/31. X bought the remaining ownership of B thus creating a controlled group situation.

The objective is to pass the coverage & nondiscrimination test by aggragting the DB/DC plans. However, reg 1.410(b)-(7)(d)(5) requires that for permissive aggregation both plans must have the same plan year!

Required number of employees of corp B will be brought into the DB plan to pass 401(a)(26).

One solution being considered is to change the plan year of the DB plan, say, to the calendar year. However, in the year of plan year change, the DB will have a short plan year from 10/01 to 12/31 and will not have the same plan year as the DC plan and therfore, I think, the plans cannot be aggregated for the first short year of the DB plan. Am I wrong?

Any suggestions/solutions would be appreciated.

[JAY21]

Do you have a 1-year transitional rule under mergers and acquisitions that would provide any relief on the discrimination testing ? Don't remember all the rules offhand so it may not pertain or help, just thought I'd throw out the topic for further research if warranted.

[David MacLennan]

There is a grace period for coverage and participation rules - it ends on the end of the plan year following the year of the change in status. 410(b)(6)©

[AndyH]

Does this extend to 401(a)(4), however? If so, where is the tie-in?