Control groups

[Guest money40]

Good afternoon, I have a client who has completed a stock purchase of a company and this wholly owned subsidiary has a 401k plan with a 6/30 PYE. The purchasing company has a 401k plan with a 12/31 PYE. The parent wants to leave the sub's plan alone.

How do I test coverage with the two different PYE's? I have not run into this before and I can;t seem to locate any information either.

Any help would be greatly appreciated!

Thank you,

[Guest Sieve]

If the plans remain unchanged, you can continue to test for coverage separately under what I call the "1-1/2 year rule". See IRC Section 410(b)(6)© and Treas. Reg. Section 1.410(b)-2(f).

But, eventually you'll need to do something because you must have the same plan years to aggregate plans for ratio percentage & nondisriminatory classification tests (Treas. Reg. Section 1.410(b)-7(d)(5)).