Employer has two plans covering the same group of people - a 401(k) PS plan and an ESOP. As of 1/1/08 the 401(k) PS Plan was merged into the ESOP plan but this question is more about the 2007 plan year. The ESOP's loan is fully paid off so any contribution is treated like a PS contribution. In 2008, Employer made a contribution for 2007 into the merged plan. Unfortunately, I'm not clear if this contribution belongs to the PS or ESOP.

The reason I think it matters is that prior to their merger, they had different plan entry dates and eligibility requirements for contribution. ESOP allows entry after 1 year of service and then 1000 Hours & last day worked for contribution. Other plan allows entry at BOY in which 1000 hours worked and then does not require last day worked. Since both plans define eligible compensation as from date of entry, it makes a difference which one gets the allocation for new participants, and terminated participants are also treated differently.

Would it be acceptable to treat the contribution as from the ESOP in which case new participant's comp only counts from DOE and terminated participants are not eligible?

First, I would ask the sponsor what they intended. If they didn't intend anything, I would describe to them the consequences and have them decide. If they are worried about risks, I would have them chat with ERISA counsel. Following past practice or dividing the contribution proportionately between the two allocation groups might make sense. But in any event, if I were the TPA, I would not make this call on my own.

Without knowing more, and without seeing the resolution by which the plans merged, my take would be that a plan that merges into another plan ceases to exist, and the continuing plan's provisions remain unchanged and in full force (unless otherwise specifically amended). Therefore, a contribution to the continuing plan would be just that--and, in your case, it therefore would be a discretionary employer contribution to the ESOP, and would be allocated pursuant to the ESOP's allocation provisions.

I agree with Sieve. I do think that since the K PSP existed for part of 2007, had the contribution been designated as to be made and allocated pursuant to its formula for that part of 2007 that it existed separate and apart from the ESOP, that the contribution would then go as designated. However, in the absence of any designation like that, the contribution was made at a time when the ER had only one plan, the post-merger ESOP. As Sieve pointed out, it would be the ESOP's requirements and allocation formula that would apply to an undesignated contribution.

Thanks for all the responses. We did determine that the contribution was to be treated as part of the ESOP plan.