Merging of 401k Plans...

[Guest GrndLkNatv]

So Company A has a Safe Harbor 401k plan, they match 1/2 of the first 8 % of your contributions. The acquiring company, company B has a traditional 401k plan..

1. Can a Safe Harbor plan be converted to a traditional 401k plan?

2. Will company B's employees be grandfathered into their current plan?

3. What else can happen or what would normally happen in this situation??

[WDIK]

they match 1/2 of the first 8 % of your contributions.

I don't think this is a safe harbor match.

[Guest GrndLkNatv]

they match 1/2 of the first 8 % of your contributions.

I don't think this is a safe harbor match.

They match 3%, it is a safe harbor, just asked HR.

[WDIK]

Without getting into the "enhanced" match, my understanding of the safe harbor match is:

100% of the first 3% deferred, plus 50% of the next 2% deferred.

Neither of the two scenarios you have stated meet that requirement.

I'm not trying to be belligerent, just making sure that we are actually talking about a safe harbor plan so that board members can more accurately address your questions.

[John Feldt ERPA CPC QPA]

It could be a 3% nonelective Safe Harbor also. For some reason we find many plan sponsors referring to their 3% Safe Harbor nonelective contribution as a match, even though it is not tied to the participant making a deferral.

[Tom Poje]

of course there are no clear guidelines at this time how to handle your scenario. A safe-harbor plan is suppose to be 12 months long. and you can't aggregate a safe harbor with a non safe harbor (or at least aggregate and get the safe harbor free ride)

My guess (and I do mean guess) at the cleanest way to handle things is simply continue with plans is until the end of the year and then merge one way or the other.

you did not indicate if it was a stock acquisition or asset purchase, and that probably makes a big difference. If my feeble brain remembers, coverage is not (or shouldn't be) an issue because of the acquistion free -ride rules.

nondiscrim might be an issue (but not in the safe harbor).

I suppose what becomes an issue is if the employees involved in the takeover become immediately eligible for the other plan (hopefully not)

[david rigby]

As usual, Tom offers good comments. Another scenario to consider: after acquisition, will some A employees "transfer" elsewhere within B, which (at least on its surface) could alter the benefits package applicable to that person?

These coverage issues should be addressed prior to closing the sale.