Controlled Group - Permissive Aggregation - Plan Termination

Company A and Company B are part of a controlled group.  They each have their own 401(k) plans and TPA firms.  Company A's 401(k) plan can't pass coverage on its own (neither ratio or ABT).  The Plan's have been permissively aggregated for coverage and discrimination testing purposes in prior years.  I anticipate having to permissively aggregate the plans for the 2020 Plan Year as well although I don't have data for Company A as of the current date. 

Company A will have an ownership change in April (although it could be June or July).  Employees will terminate employment with Company A and become employees of Company C.  Company A would like to terminate their plan prior to the ownership change.

Does anyone have any suggestions in regards to the 2021 coverage test?  I anticipate the plan would not be able to pass coverage on its own (for the short plan year). 

Would I be able to use the 410(b) transition rules? Due to the ownership change, do I get a free pass on coverage testing?

Do I tell the client to wait and terminate the plan on 12/31/2021 so I can use permissive aggregation for the 2021 Plan Year?

Any suggestions would be helpful.  Thank you.

20 minutes ago, kdubinski said:

Would I be able to use the 410(b) transition rules? Due to the ownership change, do I get a free pass on coverage testing?

Do I tell the client to wait and terminate the plan on 12/31/2021 so I can use permissive aggregation for the 2021 Plan Year?

Yes. People often think of transition rules only for mergers but they work the other way as well. You do not get a free pass on testing, unless no one (or no HCE) is benefiting.

I would not terminate until 12/31/2021 and use permissive aggregation (and transition rule, as no longer part of CG at year-end). Terminated employees can get distributions, although I don't know if you need to leave a person (owner/seller?) to keep the plan open - I don't think so, because the plan doesn't need to have assets all the time.