Mergers and Terminations-when is ADP Deadline?

A plan merges into another plan effective on 10/1/2020.  The plan performs a short year test from 1/1/2020-9/30/2020.  It fails adp testing.  When are correction due to avoid the 10% excise tax?  12/15/2020?

Similar situation, except plan actually terminates effective 9/30/2020.  When is the deadline to correct ADP without penalty?  

The Plan that merges disappears on 10/1 and has a short plan year, yes? If so 2.5 after months is the refund deadline.

If the Plan terminates you may have had created a short testing year but unless you distribute all assets you haven't created a short plan year so 2.5 months after the plan year ends.

Thank You!  for the merger side...if the merged group begins participating effective 10/1, but assets do not move until 12/1, does that change the timeline.

Also, follow up question:  if the employer is part of a MEP plan but terminate mid year (ie: 10/1/2020) what would the timeframe be?

On 10/6/2022 at 1:11 PM, Lou S. said:

The Plan that merges disappears on 10/1 and has a short plan year, yes? If so 2.5 after months is the refund deadline.

For any other purpose, we would not think of either plan in a merger as terminating. It may make sense to think of it as terminating for ADP purposes, but I don't think there is any published guidance saying that.

There is no guidance from the IRS on how to test merged plans.  If the two plans have the same plan year, it makes more sense to test the deferrals together for the entire year -- e.g., plan 1 has a calendar year; plan 2 has a calendar year; merger date is 7/15/2022 - take all 2022 deferrals/comp from plan 1 and all 2022 deferrals/comp from plan 2 and test them together in one big test.  the justification for this is that the surviving plan "owns" all the assets/liabilities of both plans for the entire year.  Again, no guidance, but i've spoken with IRS people on the dais at several conferences, and they have always said this is a reasonable interpretation.

If the plans had different plan years, I'd test the disappearing plan for the "short year" as you suggest (and I agree with the correction deadline), and then test the surviving plan for the entire year with the merged-in participants being like new entrants for the period between the merger date and the end of the year.

One more thing ... if the two plans are PRIOR year tested, there IS guidance on how to do it in the regulations.  You do a weighted average of the prior year ADRs for the two plans.

FWIW.  :)

34 minutes ago, Ilene Ferenczy said:

One more thing ... if the two plans are PRIOR year tested, there IS guidance on how to do it in the regulations.

This could be in the regs, but my recollection is it's in one or two old notices, maybe from 1997 and/or 1998. Would need to look them up. Just saying that in case someone needs and wants to look for this. If you don't find it in regs, Google the old notices. Actually, try 98-1 and work back from there. I don't recall this having been worked into/superseded by regs as Stated by Ilene Ferenczy, but that may be.