Short Plan Year Safe Harbor Plan

[Guest lovework]

• SH Plan with calendar year plan year was acquired in M&A transaction. Parent plan is fiscal year plan year and not SH.
• Need to create short plan year in SH Plan to align plan year with parent's plan year once 410(b) transition period ends.
• New fiscal year plan year will not be eligible for SH testing b/c of plan aggregation.

Question: Does creating short plan year trigger ADP/ACP testing for short plan year? Note that the following plan year cannot be a 'safe harbor plan' because it is now part of controlled group and aggregated for testing.

Many thanks, brilliant minds.

[MWeddell]

A short plan year can only satisfy the 401(k) / 401(m) safe harbor conditions if it is both preceded and followed by a 12-month plan year that meets the safe harbor conditions. Sounds like that won't happen in your situation.

[Kevin C]

There is one other situation where a SH plan can have a short SH plan year. A terminating SH plan can have a short final plan year if the termination is in connection with a 410(b)(6)© transaction (or the employer incurs a substantial business hardship). See 1.401(k)-3(e)(4).