Eligible Wages, Contribution/Compensation Limits and Plan Acquisition?

[MD-Benefits Guy]

Our company was acquired earlier this year.  New company has a 401k plan design that stops employees from contributing once they hit the $345,000 compensation limit (even if they are below the 23,000 contribution limit). While not common, I believe this is permissible.

The new company defines Eligible Wages as "base pay, annual bonus, sales bonuses, overtime and shift differentials and merit payments, as applicable."

Old company was acquired in March of this year and 401k deferrals continued through the close date in March.  From March - June, employees were paid on old payroll system and not eligible to contribute to either 401k plan.

Starting in July, employees are being paid on new company payroll and are eligible for new company 401k.  The problem - several employees are not able to contribute to the new 401k because they are showing as hitting the $345,000 compensation limit?

Not sure how or why earnings that occurred under the old 401k plan and earnings that weren't eligible for any 401k contribution at all, are being considered towards the compensation limit under the new 401k plan....I think this might be an error by the new company.  The old 401k plan is being shut down (not merging or being acquired by the new company/plan), and will have its own independent testing and 5500.

Under these circumstances, is it proper to have earnings from previous payroll be considered as compensation under the new 401k plan?  Anyone experience something similar?

Thanks if advance.

[MD-Benefits Guy]

To provide some clarity, I am trying to determine which wages may be counted towards the acquiring company's $345,000 compensation limit.  There are three distinct periods under consideration:

I. 1/1/24 - 3/18/24 Company A (acquired company) operated independently with its own 401k.  I am pretty sure that wages paid during this time would not qualify as wages against Company B's (continuing company) $345,000 compensation limit.

3/18/24 - Company B acquires Company A....cash sale, all outstanding shares of Company A are acquired and Company A no longer trades.  Board resolution is signed announcing that Company A's 401k is terminating 3/18/24.

II. 3/19/24 - 6/30/24 - Employees of Company A continue to be paid under Company A's payroll system (and tax ID) but are not eligible to participate in either Company A's or Company B's 401k plan.  At this point Company A and Company B are in the same control group, but given that Company A employees are not able to contribute to Company B's 401k, I'm not sure how or if these wages should/could count against Company B's compensation limit.

III. 7/1/24 - 12/31/24 - Employees from Company A become eligible for all Company B benefits, including 401k.  These wages without question count towards Company B's compensation limit.

So, the question is...should I and/or II be a part of Company B's calculation for compensation limit.