401(k) Plan Merger with Safe Harbor 401(k) Plan

[Guest 401Retire]

The company in question acquired another company that sponsors a 401(k) plan with a 3% nonelective contribution. The Safe Harbor plan is not being terminated, but rather merged into the existing 401(k) plan. Participants are eligible to participate as of 4/1/14, but the assets have not merged yet.

Do we have to wait until the end of the plan year (2014 calendar year) before merging 401(k) assets?

If not, can we suspend the Safe Harbor contributions mid-year? Are we responsible for paying out 1/1 through 3/31 or the first two quarters of the year? Is there a notice requirement to the participants announcing that the contribution is being suspended?

Thank you for your help!

[MWeddell]

Sounds like a mess to me.

To suspend the contributions to the safe harbor plan and amend that plan so that employees are no longer eligible to contribute to it, employees have to be notified. If they are not notified 30 days in advance, then it is not clear that the notification is effective. Meanwhile, assuming that there are both HCEs and NHCEs in the group covered in the safe harbor plan, if the employees become eligible to contribute to another plan, then you may have a problem with the safe harbor plan too.

I don't see any problem with merging the plans' assets.

I suggest that the employer talk with legal counsel.