2 active plans in same plan year

New  client comes to us and asks us the establish a 401(k) SH plan for them.  We generated the documents, safe harbor effective January 1, 2022 and client executed the document. 

We just learned that advisor aware that the client already has a 401k plan, which is not safe harbor.  

What options do we have now?  Can a client sponsor two 401k plans in the same year ( one safe harbor and one non-safe harbor)?

What type of safe harbor? Matching or Non-elective? I think you have some problems either way but your path to correction might be easier if you have Non-elective safe harbor.

I'm not sure if this flies or if you need an EPCRS VCP submission but if they elected the 3% non-elective safe harbor you might be able to merge the existing 401(k) plan into the new 401(k) Plan and treat it as one 401(k) plan for testing, assuming both plans have the same eligibility and cover the same group of employees and you don't have any prohibited cutbacks in the the new document that conflict with the old. While not technically correct it would seem to have the same effect of amending the existing 401(k) Plan.

If you put in Matching safe harbor and they had an existing 401(k) I think you have bigger problems as the old 401(k) would have had to be amended to be amended last year with notices given out timely for them to be a safe harbor matching for the current year.

It's an odd set of facts I haven't seen before.

The safe harbor is a 3% Non-elective.

This is getting even better.

The 'first' plan of the client, let's call it Plan A, was effective January 1, 2019 and is currently still on a PPA document. 

The 'second' plan of the client, let's call Plan B was effective January 1, 2022 with deferrals effective September 1, 2022 and safe harbor for full plan year.  In reviewing the provisions of Plan A and Plan B, there are a number of protected benefits in Plan A that are not part of Plan B.    We can easily amend Plan B to include the protected benefits that are in Plan A.  And I agree, we can merge the plans, but I think that Plan A would need to be restated for Cycle 3 (late amender) before I would suggest merging the plans.

Note: The same employees are covered by both Plans.  We are still trying to determine how the deferrals are being handled since there are 2 plans.  More to come.