Short Plan Year and 2 1/2 month deadline

[buckaroo]

One of our plan sponsors was recently acquired and the acquiring company decided to merge the plan that we recordkeep into the acquiring entity’s plan effective 4/28/2017.  We informed the plan sponsor that this creates a short, final plan year for the plan (1/1/2017 – 4/28/2017).  We discussed the notion that the regulations are unclear regarding the ADP/ACP testing in a year of merger.  Based on our conversations, we stated that we could provide an ADP/ACP test for the short year and requested the appropriate census data to perform it.  At this point, the plan sponsor has still not provided the data.  If the plan sponsor goes with this testing methodology, my questions are: 

How does the 2½ months factor in regarding the 10% excise tax?  Since the plan terminated and merged effective 4/28/2017, what the last date to perform the corrective distributions (if any)?  (When does the 2½ month deadline expire?)  I know for the Form 5500, regardless of when the plan terms, you have 7 months from the last day of the month in which the plan terms.  I do not see a similar rule for the ADP/ACP testing. 

Is this even an issue since the assets merged into the other plan on 4/28/2017?  Has a “corrective distribution” effectively been performed? 

Either way, the funds should be either removed from the other plan (no recharacterized as post tax).  Does the 2½ month deadline apply to this action? 

[Tom Poje]

perhaps

there is what I call the very strange.  emphasis mine. I leave the interpretation up to you!

1.401(k)-2(b)(2)(v)

(v) Distribution. Within 12 months after the close of the plan year in which the excess contribution arose, the plan must distribute to each HCE the excess contributions apportioned to such HCE under paragraph (b)(2)(iii) of this section and the allocable income. Except as otherwise provided in this paragraph (b)(2)(v) and paragraph (b)(4)(i) of this section, a distribution of excess contributions must be in addition to any other distributions made during the year and must be designated as a corrective distribution by the employer. In the event of a complete termination of the plan during the plan year in which an excess contribution arose, the corrective distribution must be made as soon as administratively feasible after the date of termination of the plan, but in no event later than 12 months after the date of termination. If the entire account balance of an HCE is distributed prior to when the plan makes a distribution of excess contributions in accordance with this paragraph (b)(2), the distribution is deemed to have been a corrective distribution of excess contributions (and income) to the extent that a corrective distribution would otherwise have been required.