Spin off - MEP to new plan

Patrick Tool LLC employer is participating in Business 401(k) Plan (MEP plan) effective 01/01/2023. During mid of 2025, Patrick Tool LLC decided to establish new plan and spin off from Business 401(k) Plan and completed the participants cessation on 31/07/2025 and establish new plan as Patrick Tool 401(k) Plan as effective date of 08/01/2025. The first return, it will be short plan year. 

For the compliance testing whether we required to do two separate testing for two period like 01/01/2025 to 07/31/2025 and 08/01/2025 to 12/31/2025.

Since the employer is same whether we have to aggregate both the period data and required to do compliance testing for full plan year under Patrick Tool 401(k) Plan. Even though the plan effective is mid of the plan year, we have to complete the testing based on full year compensation and contribution or else based on the short plan year.

you may want to consider a corrective amendment to the plan to provide a Jan 1 effective date to avoid prorations caused by the short plan year.  the annual limits will still need to be combined (whether you change to Jan 1 or not), you just won't need to do the short plan year stuff.

2 hours ago, ERISA_Guy said:

you may want to consider a corrective amendment to the plan to provide a Jan 1 effective date to avoid prorations caused by the short plan year.  the annual limits will still need to be combined (whether you change to Jan 1 or not), you just won't need to do the short plan year stuff.

Whether this plan required two Testing. From 01/01/2025 to 07/31/2025 till the cessation and from effective new plan 08/01/2025 to 12/31/2025. Or else, we can aggregate both the compensation and contribution and test under newly established plan with the effective date of 08/01/2025.