Closed MEP Safe Harbor spinning off assets after 10/1

[gdlfa]

If there is a plan sponsor who wants to switch from a Closed MEP to their own plan after 10/1, and they currently have safe harbor status with the Closed MEP, can they maintain that safe harbor status with the new spinoff plan?  I have been researching and see mixed opinions, but nothing definite.

[JackS]

I am winging this one but since no one has responded to I'll throw this out and let others shoot it full of holes if they disagree.  I think you can but I'd set up the plan so that

1) The safe harbor used for the entire year is consistent. 

2) You don't duplicate contributions  - i.e. offset the Safe Harbor in the new plan by the SH provided in the MEP plan

3) Design the plan to avoid impermissible mid year changes.

 

[gdlfa]

15 minutes ago, JackS said:

I am winging this one but since no one has responded to I'll throw this out and let others shoot it full of holes if they disagree.  I think you can but I'd set up the plan so that

1) The safe harbor used for the entire year is consistent. 

2) You don't duplicate contributions  - i.e. offset the Safe Harbor in the new plan by the SH provided in the MEP plan

3) Design the plan to avoid impermissible mid year changes.

 

Thank you JackS!  Do you see a problem with the plan document stating a "new" plan, and the 10/1 safe harbor deadline for such plans?

[Larry Starr]

1 hour ago, gdlfa said:

Thank you JackS!  Do you see a problem with the plan document stating a "new" plan, and the 10/1 safe harbor deadline for such plans?

Without dealing with the original question, but just the dating of the replacement document, I don't think it should be a new plan; it is a continuation of the same plan of the employees, just a different format.  The effective date of the plan should be the effective date of the original adoption for this employer, and the date of the amendment should be the first day of the current plan year, IMHO.

[gdlfa]

18 hours ago, Larry Starr said:

Without dealing with the original question, but just the dating of the replacement document, I don't think it should be a new plan; it is a continuation of the same plan of the employees, just a different format.  The effective date of the plan should be the effective date of the original adoption for this employer, and the date of the amendment should be the first day of the current plan year, IMHO.

We have traditionally done Open MEPs this way, but the thinking of setting up a "new" plan for Closed MEPs is that we'll be filing a separate 5500 from the MEP once we spin off.  If we treat it as a restatement, wouldn't there be an inconsistency in 5500 filings?

[Larry Starr]

2 hours ago, gdlfa said:

We have traditionally done Open MEPs this way, but the thinking of setting up a "new" plan for Closed MEPs is that we'll be filing a separate 5500 from the MEP once we spin off.  If we treat it as a restatement, wouldn't there be an inconsistency in 5500 filings?

Nope.  Fill in box 4 accordingly and you are fine.