Ineligible Rollover

[goldtpa]

Company A merged their 401(k) into subsidiary B's 401(k) plan. Company A did not do ADP test for 2008 before merging the plans. ADP test for Co A fails, testing the companies separately. Now money needs to be returned to the HCEs of Co A. I believe that the distribution must come out of the merged 401k plan to satisfy the ADP Test. However does the interest have to come out as well, since the merged plan accepted money that was not eligible to be rolled over? Thanks.

[Guest Sieve]

For what it's worth, there were no rollovers here, because there were no voluntary participant elections to transfer assets and no distributable event. This was a merger of plan assets, and the status of partcipant accounts as being eligible for rollover (or not) is of no consequence.

I'll leave it to the TPAs to determine the impact of the merger, if any, on the answer to your question.