Change in Controlled Group - affect on 401(k)

4 companies (S-corps) are part of a controlled group and sponsor/participate in a safe harbor 401(k) PSP with 1 year eligibility and monthly entry dates. Effective January 1, 2021, one of the companies changed ownership and is no longer part of that controlled group of companies. Their employees that were participants as of 1/1/2021 are still participating in the plan. They actively deferred in 2021 and have received a match. The plan's profit sharing allocation has not yet been deposited. 

The company that changed ownership, Company A (S-corp), identifies with business code 484120 (general freight trucking long distance). There are 5 owners - 3 of which own 26% each and the other 2 each own 11%. This same 5 owners also have identical ownership in another company (partnership), Company B, that identifies with the same business code. Company B has a SIMPLE Plan effective July 1, 2020 with full eligibility and the 3% match election. 

Does the existing 401(k) plan need an amendment to add Company A as an unrelated participating employer effective 1/1/2021 effectively making it a MEP? Do Company A and Company B form a new control group? If yes, then how do they sort out the 401(k) plan that Company A currently has and the SIMPLE plan Company B currently has for both 2021 and now 2022?

Thanks!

On 1/20/2022 at 12:34 PM, M Norton said:

Does the existing 401(k) plan need an amendment to add Company A as an unrelated participating employer effective 1/1/2021 effectively making it a MEP?

Depends on what the plan document says, but probably less. Some plans say you have to be a controlled group member to participate, some don't say that. Some have different blanks in adoption agreement for listing controlled group members and non-controlled group members. Amending after end of plan year has issues which would need to be explored.

On 1/20/2022 at 12:34 PM, M Norton said:

Do Company A and Company B form a new control group?

Although your description of the facts lacks sufficient detail for a definitive conclusion, M Norton, probably a brother-sister controlled group.