New Safe Company - SH Plan

I have an employer spinning off from an existing company effective 10/24/2020.  They want to set up a plan for 2020.  They want to implement a SH match for 2020.  Can the employer set up the plan to be effective prior to the company being effective - i.e. an effective date of 10/01/2020 so they can cover the 3 month period?

The sponsoring employer needs to be able to adopt the plan document on or before 10/1. What needs to be in place before the new company is a considered an entity capable of taking an action like adopting a plan? I don't know; it will probably depend on the laws in your state. Presumably there are some lawyers involved with the spin-off - can you ask them?

Alternatively, have the plan adopted by the presently-existing company, with an effective date of 10/1, covering only the the people who will be employees of the company being spun off. Then after the spin off occurs, have the new entity adopt the plan and the old company revoke its adoption, and name the new company as plan sponsor simultaneously.

Will the new company be part of a controlled group or affiliated service group with the existing company?  There is an exception to the 3 month initial plan year requirement for a "newly established employer".  But, note that the term "employer" under the 401(k) regs includes members of a controlled group or affiliated service group. I don't think the new entity would be a "newly established employer" if it is part of a CG or ASG with a pre-existing employer.   The definition of successor plan uses the same definition of "employer" from 1.401(k)-6.
 

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1.401(k)-3(e)(2) Initial plan year. A newly established plan (other than a successor plan within the meaning of §1.401(k)-2(c)(2)(iii)) will not be treated as violating the requirements of this paragraph (e) merely because the plan year is less than 12 months, provided that the plan year is at least 3 months long (or, in the case of a newly established employer that establishes the plan as soon as administratively feasible after the employer comes into existence, a shorter period). Similarly, a cash or deferred arrangement will not fail to satisfy the requirement of this paragraph (e) if it is added to an existing profit sharing, stock bonus, or pre-ERISA money purchase pension plan for the first time during that year provided that—

(i) The plan is not a successor plan; and

(ii) The cash or deferred arrangement is made effective no later than 3 months prior to the end of the plan year.