Merging SH Plan into Non-SH Plan

[austin3515]

What are the parameters for merging a SH Plan into a non-SH Plan?

I can't find anything, even in the Outline Book... Can I continue the SH portion of the plan for just those participants merged in from the SH Plan? IT is a separate legal entity that was recently acquired.

Also, does the merger itself "blow" the 410b6c grace period which just opens up a whole other can of worms?

Or are my choices a) wait until the first day of a plan year, or b) discontinue the SH mid-year and therefore run ADP testing, etc.

[Kevin C]

There is no guidance for mergers of SH plans. That section of the regs just says "Reserved".

If they want to temporarily continue the SH only for the participants currently in the SH plan, I would keep the plans separate until the end of the 410(b)(6)© transition period. Or, until the end of the plan year of the transaction.

If they want to stop the SH mid-year, the plan can still be SH for the final year if the termination is in connection with a 410(b)(6)© transaction. 1.401(k)-3(g)(4)(ii).

[austin3515]

If they want to stop the SH mid-year, the plan can still be SH for the final year if the termination is in connection with a 410(b)(6)© transaction.

But if we are merging and not terminating?

[Belgarath]

Did they do a "maybe not" notice? If so, why can't they do the SH up through the merger date (with proper advance 30 day notice, of course)?

Just a thought.

[Kevin C]

If you terminate the SH plan and those participants become eligible for the other plan, 1.401(k)-1(d)(4) forces you to merge balances for the actives into the Employer's "alternative defined contribution plan" since the plan termination will not be a distributable event. In that case, a merger is the only way to complete the plan termination.

[austin3515]

So what you are saying (Kevin) is if I merge the SH plan into the non-sh plan, that is an acceptable reason to have a short SH Plan Year?

And I guess the next question is, what if I wanted to continue to provide the Safe Harbor Contribution for the legacy participants? Any way to do that? The entire merged plan will be SH in 2015.

[And no, it is not an option to merge the non-SH plan into the SH Plan in this case - the non-SH Plan has many many more partiicpants and the far superior provider].

[Kevin C]

What I'm saying is that terminating the SH plan in connection with a 410(b)(6)© transaction allows you to have a short SH year. I also see it as both a termination and a merger, not one or the other. The merger is the method for getting the benefits out of the terminating SH plan.

If they want to continue the SH contribution for those in the SH plan through the end of the year, take advantage of the 410(b)(6)© transition period, continue that plan through the end of the year and merge at year end. I don't see any other way to have that group continue to be SH for the remainder of the year. You certainly can not add SH for that group to the non-SH plan during the year.