Adding "11th Hour" 401(k) Arrangement

[SMB]

Been a while since I've encountered a similar situation and am just looking for confirmation (or condemnation!) that the following is "doable" -

Existing Profit Sharing Plan (calendar year plan year) wants to add a 401(k) arrangement yet this year. Definitely a "safe-harbor 401(k)" candidate, but obviously too late for SH for 2011 at this point.

So, for 2011 the Plan will adopt a "traditional" 401(k) arrangement effective December 1, 2011, using "prior year testing" with "deemed 3% deferrals" and "deemed 3% matching" for ADP/ACP purposes, allowing the HCE participants to be able to defer 5% of comp and receive a 100% match (i.e., also equal to 5% of comp) for the 2011 plan year.

Switch to "safe-harbor 401(k)" effective January 1, 2012.

Viable approach? Anything better?

Thanks for any and all replies.

[Lou S.]

Viable approach.

[Guest Sieve]

What about this for better . . . How about changing plan year as of 12/1 to a 12/1-11/30 plan year, amending plan into SH as of 12/1, and then switching back to calendar year plan year as of 1/1/2013 or 2014? That way, you take advantage of SH for cy 2011, and you can fit 2 max deferrals (2011 & 2012) into the first py.

[SMB]

Lou - thanks for the "confirmation".

Sieve - thanks for the "inspiration". Just so I'm clear, your approach would entail: (1) a short plan year 01/01/2011-11/30/2011, (2) a full plan year 12/01/2011-11/30/2012, a short 1-month plan year 12/01/2012-12/31/2012, and (4) back to a full calendar year plan year 01/01/2013-12/31/2013 (and, obviously, all of the amendments necessary to provide for same)? This way, a full salary deferral contribution could be made in December, 2011 and another in the following plan year.

May be too "convoluted" for my client to be able to absorb, but glad to know it's a "possibility".