Client has a 25% MPPP they no longer want because older owner retired. They want to adopt 3% SH 401k Profit Sharing Plan for 2005 calendar year.

If we amend MPPP to a 0% formula, distribute the 204(h) Notice and restated the MPPP to a PSP with k feature, am I stuck with a short plan year? If so, can I have a short plan year for a safe harbor k in this situation?

Wouldn't the client be better off restating to a 401k PSP for 2005 and then adding safe harbor for 2006?

Help

You're not stuck with a short plan year if you restate the MPPP effective 1/1/2005 (assuming you can do this without 411d6 issues). A traditional 401(k) instead of the safe harbor 401(k) is also an option, especially because the plan may be able to rely on the deemed 3% rule.