Spinoff Unrelated entity

[52626]

Company A sponsors a 401(k) Safe Harbor Plan - Company B is a participating employer - Not related to Company A. Company B wants to spinoff to another plan.

1. The plan Company B will spin off to is not Safe Harbor

Can Company B Spinoff Mid Year to a Non Safe Harbor Plan?

I thought a safe harbor plan could not transfer to another plan mid year.

Thoughts

Teresa

[david rigby]

1. I'm just supposing: wouldn't B have to create its own plan (separate from all others) as an interim step?

2. n/a

[Kevin C]

The plan amendment to remove Company B from the safe harbor plan would suspend the safe harbor contributions for Company B employees. I think that would put you under 1.401(k)-3(g). If they put the language in the SH notice that they may reduce or suspend the SH contribution, they can do the amendment, but the plan would lose it's safe harbor under 1.401(k)-3(g)(1)(i)(E) or 1.401(k)-3(g)(1)(ii)(E). It would be best to wait and do the spin-off at the end of the plan year.