Controlled Group - 2 plans safe harbor/non safe harbor

[WCC]

I found the below discussion (link at the end of my post) very helpful for my question; however, I would like to ask a question regarding what resolution would exist in the following scenario:

Company A buys 100% of company B in a stock sale. Company A maintains a non safe harbor 401k plan. Company B maintains a safe harbor plan. The sponsor intends to keep both plans separate. However, based on preliminary testing, I cannot pass coverage when combined and I don't think I can pass ABT either. For example:

Plan A (non safe harbor plan) -

NHCE - 150 (all eligible)

HCE - 10 (all eligible)

Plan B (safe harbor plan) -

NHCE - 3 (all eligible)

HCE - 7 (all eligible)

Coverage testing for plan B is 4.76% ((3/153)/(7/17))

Coverage testing for plan A is 166.67% ((150/153)/10/17))

I must be doing something wrong. I cannot combine a safe harbor and non safe harbor for a combined ADP/ACP test. Given the above participation in each plan, the sponsor cannot maintain these two plans separately, correct? Any thoughts?

Thank you

http://benefitslink.com/boards/index.php?/topic/34884-safe-harbor-and-controlled-group/?hl=%2Bcontrolled+%2Bgroup+%2Bsafe+%2Bharbor#entry182873

[ETA Consulting LLC]

You're not missing anything. You must change something by the end of the transition period.

Good Luck!