Testing a Safe Harbor 401(k) Plan with a Non-Safe Harbor 401(k) Plan

[pam@bbm]

We have a 401(k) Plan that has safe harbor match.    The employer acquired a second company in October 2022 and this company has a 401(k) Plan that does not have any safe harbor contribution.    I'm not sure how to test the 2 plans.     Can we test them separately or are they required to be aggregated?   

[Lou S.]

If you met the §410(b)(6)(C) transition rules (I think that's the correct cite), and your documents allow you can test them separately for 2022 and 2023 under the transition rules.

[cathyw]

You cannot test a safe harbor plan and a non-safe harbor plan on a combined basis.  Therefore, after the transition period the plans would have to satisfy minimum coverage under 410(b) in order to test separately.  If you can't satisfy coverage, then you would have to amend one of the plans so that they're either both safe harbor or non-safe harbor (or merge the plans) so that they can be tested on a combined basis.

[Paul I]

Manage the timing and the effective dates of any plan amendments very carefully.  A significant change in a plan's provisions will end the transition period immediately.

[Nate S]

And don't forget the caveat to every requirement that you test Plans separately, "unless you have to"!