Adopting Employer doesn't want to fund safe harbor contribution

[Rai401k]

We have a client that has an adopting employer. The adopting employer will cease participation in the plan as of 12.31.2014. (Ownership will changed and no longer a controlled group).

The current plan is a definite safe harbor plan (3%) however the adopting employer does not want to fund it for their employees for 2014.

What are the repercussions for the plan if the adopting employer does not fund the safe harbor for their employees.

Even though the employer/plan sponsor will be funding it for their employees, it still puts the plan in jeopardy.

Has anyone had this situation? The adopting employer doesn't seem to care that the plan will be in jeopardy since they are going to be spinning off on to another plan starting 1/1/2015. Also because they have no association with the current employer going forward.

[Lou S.]

It's a qualification defect.

[BG5150]

And qualification defects affect ALL adopters. Of which this company was one.

[Lou S.]

Oh and it will probably taint the plan they are spinning off to as well.

[Rai401k]

Thank you, this is what we have been telling them but they don't seem to get it. I agree that the spin off plan is starting off on the wrong foot.

Thanks!

[BG5150]

Does the sponsor have any legal recourse to force the adopting ER to pay the SH?