Involuntary transfers between 2 employer plans?

[AndrewZ]

We have a potential client who has separate plans for the statutorily-excludable employees, and the non-excludable employees (who are eligible for SH Match). They automatically process involuntary transfers to the 2nd plan for all employees who shift eligibility. I originally couldn't imagine that the IRS intended transfers for anything besides spin-offs or mergers, but Reg. 1.411(d)-4 Q&A 3 provides an exception to preserving 411(d)(6) protected benefits in the case of voluntary transfers between plans in exactly such a situation. This seems to imply that the arrangement with the involuntary transfers is OK (assuming protected benefits are preserved)?

The document has no special language authorizing this -- only generic language in the "Trustee" section, stating that the Administrator may direct the Trustee to transfer the Participant's account to another plan's trust, provided that the receiving trust permits.

I can't seem to find anything that specifically authorizes such transfers -- or prohibits them. Does anyone have any experience or information on this?

Of course, I think we would recommend instead that they have a single plan with a year-of-service requirement for SH matching contributions (aware that ADP/ACP testing and TH minimums applies to the excludable employees) - the current arrangement is overly complex and expensive.

Thanks