A company with a June 30 fiscal year maintains a MPPP with a December 31 plan year. The company wants to raise the contribution to 8% from 6%, effective July 1. In other words, if the amendment is effective July 1, 2000, can a 6% contibution be made on compensation in the first 6 months of the plan year and 8% on compensation in the second six months, effectively 7% for the plan year? The reason is that the increase was budgeted for the company fiscal year beginning July 1, 2000.

Seems odd that you would budget for more than the formula with a Money Purchase Pension Plan - usually only hear of increase's or decreases with Profit Sharing Plans in the budgetting process.

I think don't think you can use two allocation formula's in the same year for a MPPP. I've never seen it done. Unless you could get creative with the formula and show something like first 1000 hours at 6% last 1000 hours at 8%... not sure that would fly either.

The other issue I would have is with regard to the amendment, does the company plan on amending the formula again in the following years or is this a one time rate increase?

I'm not sure there's a legal reason why you couldn't change it. Anyone, let me know if you are aware of one. Certainly you can freeze a plan mid-year and have a different allocation rate (0%) afterwards. You may, however, be bounced out of safe harbor design and have to general-test.

I do not think there is any reason that you can not make this amendment. However I think you would have to test since in many companies the highly compensated get large bonuses at year end. Cross testing may help even in these situations.

This intended to be a one-time increase. The bonus issue was considered, but this is a non-profit organization and this is not an problem. We intend to rate group test. There a few HCE's due to compensation. Anyone still see any problems?