Safe Harbor Termination

[52626]

Company A maintains a salary deferral plan with a 3% non elective and 11.5% fixed profit sharing contribution.

Effective 11/2013 Board Resoluitno to terminate Plan. The next day the company A was sold to Company B. Employees will continue to receive paycheck from Company A. Starting 1/1/2014 paid from Company B.

1. Company A told no participant notice is required for the termination - informal termation

2. Company A told the safe harbor and employer contribution will be based on wages from 1/1/ - 11/8/2013

3. Company A told the participants can continue to defer through 12/31/2013

Question:

Doesn't Company A need to notify the particiapnts 30 days in advance the Safe Harbor will be eliminated?

If the resolution was to terminate the plan 11/8 - can the employees continue to defer?

If the employees can defer on wages from Nov to December - is it ok to base the sh and employer fixed on wages from 1/1/ - 11/8?

thanks for your assistance

[Kevin C]

1. Advanced notice is not required under the 401(k) regs for a plan termination in connection with a 410(b)(6)© transaction. Does "informal termination" mean it will not be submitted for a determination letter?

1.401(k)-3(e)(4)Final plan year.—

A plan that terminates during a plan year will not fail to satisfy the requirements of paragraph (e)(1) of this section merely because the final plan year is less than 12 months, provided that the plan satisfies the requirement of this section through the date of termination and either—

(i)

The plan would satisfy the requirements of paragraph (g) of this section, treating the termination of the plan as a reduction or suspension of safe harbor contributions, other than the requirements of paragraph (g)(1)(i)(A) or (g)(1)(ii)(A) of this section (relating to the employer's financial condition and information included in the initial notice for the plan year) and paragraph (g)(1)(i)(D) or (g)(1)(ii)(D) of this section (requiring that employees have a reasonable opportunity to change their cash or deferred elections and, if applicable, employee contribution elections); or

(ii)

The plan termination is in connection with a transaction described in section 410(b)(6)© or the employer incurs a substantial business hardship comparable to a substantial business hardship described in section 412©.

2. To stay safe harbor for the short year, the plan's safe harbor provisions must remain in effect through the date of the plan termination. If the plan document isn't clear on how the profit sharing contribution works for a short final year, that should have been addressed in the resolution to terminate.

3. No. Salary deferrals to plan A stop on the effective date of the plan termination. However, Company B can amend their plan to allow them to defer into Plan B.