Options for a participating employer in a safe harbor plan when there is a purchase

I am narrowing my prior question. If a subsidiary/Participating Employer (PE) is participating in a single employer safe harbor plan via a participation agreement and the company is purchased mid-year in a Code Section 410(b)(6) transaction, what are there options to leave the safe harbor plan mid-year? Assume the buyer does not sponsor a safe harbor plan. I think one options is to spin out into their own mirror safe harbor plan, and this will keep safe harbor status for the PE and the former parent plan. Is there another option - such as can the PE cease participation in the safe harbor plan before the sale and allow a distributable event without the plan losing safe harbor status? Appreciate any comments!

The PE ceasing participation in the plan does not by itself create a distributable event.

The spinoff concept may work but the buyer and seller need to agree on all of the details about how the spinoff plan is handled.  A misstep in timing, pre- and post-transaction plan amendments, employment status of the PE participants after closing, and host of other details can lead to an undesirable outcome.  For example, distributions from the seller's plan could be disqualified and become taxable, or the coverage transition period could terminate early.

As a starting point, the buyer and seller should articulate their vision and expectations for the plan after closing.

We are looking for other easier options than a spin -off. This would be a change of ownership scenario. Let's assume buyer does not want to accept a spin-off and the agreement is the PE will cease participation in the safe harbor plan before the purchase. Is this ok? Will the safe harbor plan, which is maintained by the current parent company, maintain safe harbor status for 2024? This is the question.

The 401(k) regulations - 1.401(k)-1(d)(6) Example 2 - do allow a PE to cease participation in a 401k plan. But they are silent about a safe harbor plan. 

Does anyone agree with my last comment - that it is ok to cease participation in a safe harbor plan mid year?

Thank you!

I think the counter-argument would be Notice 2016-16, which prohibits a mid-year change to reduce the number or otherwise narrow the group of employees eligible to receive safe harbor contributions. Does revoking the participation of a participating employer violate that prohibition?

That is a concern. As a practical matter, what are practitioners doing? It seems this would be coming up alot now with all the M&A activity.