Merger of Plans Safe Harbor and Non Safe Harbor

[52626]

company A is purchasing Company B effective 6/1/2014

Company B's 401(k) Plan is to merge into Company A's 401(k) - however Company A sponsors a Safe Harbor Plan and Company B does not

The merger will take place effective 1/1/2015

Question is what do with the deferrals from 6/1 - 12/31/2014 - Company A wants to live the plan as is until the end of 12/31/2014 and then merge the plans 1/1/2015. This will make the transition much easier for all.

1. Is it ok that effective 6/1/2014 the plan is amended to reflect Company A as the sponsor with their EIN and not jeopardize an of the transition rules?

2. Company A wants to amend the plan and state effective 1/1/2014 all participants in the Company B's plan are 100% vested. When the plans are merged there are a number of participants who terminated prior to 1/1/2014 that are partially vested. Any problem with using their non vested portion to offset fees once the forfeiture is triggered. Or do these employees also vest 100% as a result of the amendment.

Thanks

[MWeddell]

1. You will need to make sure the merger & acquisition transition rule does not end prematurely or perform and satisfy coverage testing for 2014. If you are relying on the m&a transition rule, then it is okay to amend Company B's 401(k) plan as long as the amendment is not a "significant change in the plan or in the coverage of the plan other than the acquisition or disposition." Treas. Reg. 1.410(b)-2(f). There is almost no elaboration in the regulations beyond the text I just quoted. I would think that amending the plan to reflect Company A as the sponsor is not a significant change, but that's just my opinion. I would think that changing the vesting schedule is a significant change and would prematurely end the m&a transition period. However, given that this is essentially a judgment issue, I would urge the client to consult with legal counsel.

2. There is no problem with that provided that the plan document after it is amended so provides.