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Transition period over safe harbor and non-safe harbor plan


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We are in a bit of a pickle :). We are the TPAs for Company A. Company A is a safe harbor match plan (calendar year).

Company A purchased Company B back in May of 2022 and never told us about it (of course).

Company B has their own plan (non-safe harbor), they DID tell their service provider about the acquisition back in 2022. The service provider said NO PROBLEM you have 2 years due to the transition period thinking they had until May of 2024. Company A finally decided to get us in the loop, and we just told them guess what the transition period ends in a week.

Needless to say, we're scrambling a bit. We can't merge as of 1/1/2024, we can't get the prior service provider to amend company B's plan to a safe harbor match plan for 2024 (understandably i guess). So now what?

The plan is to merge Company B's plan (non-safe harbor calendar year plan) in to Company A's plan (our client, safe harbor match, calendar year plan). We're thinking the best option is to amend company A's plan to add company B as an adopting ER and bring all the employees of company B on to company A's plan as of 1/1/2024. Freeze Company B's plan i guess and take it over and then merger it as of 1/1/2025....



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26 minutes ago, Lou S. said:

I think this seems reasonable. Though if you freeze Company B, you should be able to merge it into Company A at any time in 2024 no need to wait until 2025.

I think you'll want to get the SH match notice out to Company B ASAP and document why it isn't be distributed 30 days before the plan year. Document why you think the notice was given in a a reasonable time and let sponsor A make the call since the IRS could take a different position based on facts and circumstance.

I think to the extent that most of the employees in Company B contribute in 2024 and get the full SH Match the better your argument that the notice was reasonable and timely is likely to be accepted by the IRS should the issue come up.


Thanks Lou for bringing that up, the safe harbor match notice requirement didn't cross my mind for the employees of company B. Yes we'll be sure to document everything if we go this route. 

Ah ok i didn't think we could merge in 2024, thanks!

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