Multiple Employer spin-off - Safe Harbor

[PMC]

Employer A sponsored their own 401(k) Plan for several years. In 2009 they transferred the assets of that Plan to a multiple employer plan (sponsored by an HR Services outfit) in which they became an adopting employer. It is a safe harbor plan. Now 2011 (eff. in March) they want to spin-out of the MEP into their own plan. I understand that they would have to ADP/ACP test for the short year under the MEP. A few questions -

1. My thought would be the Plan (2011) would essentially be a new start-up plan for this Employer A with assets attributable to them being transferred from the MEP. This would be Employer A's #002 plan. However,

2. If the 2011 Plan is a start-up (eff. March 2011) and this Employer wants to have a calendar year Plan year, would they be eligible to establish this Plan as a Safe Harbor plan? There would obviously be more than 3 months left in the PY to make elective deferrals, BUT would this Plan be considered a "successor plan" and thereby prohibiting a plan year with fewer than 12 months?

I suppose a way around that would be to establish the Plan Year as 3-1 to 2-28 for an initial full 12 months and then change to calendar year in the future if need be.

3. Or, rather than treat the 2011 plan as a new Plan, could it be treated as a continuation of their "separate plan" while participating in the MEP thereby resolving the "successor plan" and short year testing issues. What would the plan number of this plan be? Not 001, that one has long since been dissolved. 002?

Thanks for any comments.

[Guest Kevin1]

PMC:

I have a similar situation. How did you resolve yours?

[Benefits to all]

PMC, did you ever reach a consensus on this issue? I have a similar issue and have been trying to track down some guidance.