Safe Harbor and Plan Merger

[PMC]

Any comments on safe harbor and plan mergers -

Company A (calendar year/plan year) maintains a safe harbor plan utilizing the matching method.

Company B (calendar year/plan year) only allows elective deferrals; no employer contributions.

They are a controlled group, plans tested separately, all different employees, and now want to merge the plans during 2001; 6-1-01 for example. Would you:

1. Amend Company B's plan to create a short plan year from 1-1 to 5-31 and do an ADP through that period. Then merge the plans effective 6-1-01 and start the safe harbor match for the Company B's employees as of that date (given proper Notice). They wouldn't have been eligible to participate under the Company A plan prior to 6-1-01, so doesn't seem like they would be entitled to the safe harbor match retro to 1-1-01 under Company A's plan for a time when they weren't eligible to participate.

2. Would merging Company B into Company A mean that the Company A plan will now have to give Company B participants the safe harbor match retro to 1-1-01?