Business acquisition - separate safe harbor 401k plans

[Belgarath]

I haven't yet started looking into this, but wondered if anyone had any off-the-cuff opinions.

One business acquires another - buys their stock. two separate plans involved, two different plan years. Once the 410(b)(6)© transaction period ends, they want to know if they can continue to run the plans separately. Other than the usual testing issues for coverage/nondiscrimination, they also have separate safe harbor formulas - one is the SH match, and one is the SH nonelective. Neither plan excludes HC's.

Again, without having delved into this, I don't see how this would work as is by maintaining separate plans. Any general thoughts?

[rcline46]

As long as each plan passes 410(b) on its own you are fine. If not -BOOM.

[Belgarath]

Thanks. So just to clarify a bit - suppose each plan satisfies 410(b) on its own. Are you are saying that because the safe harbor feature is a design-based safe harbor, that this, in and of itself, is ok? Or are you saying something else entirely?

If yes, then I assume if one plan has general tested PS formula, that you'd still have to run nondiscrimination testing on a combined basis, which might well fail...

Thanks again

[rcline46]

If each plan passes 410(b), then for ADP testing or any other Safe Harbor (ADP, ACP, 401(a)(4)) you only need to look at that plan.

When you get fancy you need to look at the general population and the ABPT. If you pass the ABPT, then you can go back to your own/each plan.

[Belgarath]

Thanks. And of course no permissive aggregation with separate plan years, although plan years could be amended to be identical if permissive aggregation would make the difference if plans otherwise fail.

Actually, on that subject, does it really matter? I don't think, using permissive aggregation, you could maintain the two separate 401(k) ADP safe harbor plans using different SH formula (1 matching, 1 nonelective) right? Only way to do that is to have both plans pass 410(b) separately as Rcline already mentioned previously.

What a pain...