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Amending discretionary ps formula


MarZDoates
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Profit sharing plan: Discretionary as to amount. Formula is currently integrated. Allocation conditions are standard (eligible to receive allocation if employed on the last day of the plan year or if terminated, worked more than 500 hours during the year).

We are restating for PPA and want to amend the formula to cross tested (each in own class).

Can we make the restatement effect January 1, 2015 (to be adoped before 12/31/15) so that the 2015 contribution will be allocated using cross tested formula?

Is this a protected benefit issue?

Or must we wait to make the effective date January 1, 2016 (and adopted before that date)?

Thank you.

QPA, QKA

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I think the allocation language was posted in a way that we wouldn't normally state it:

eligible to receive allocation if employed on the last day of the plan year or if terminated, worked more than 500 hours during the year

that boils down to "employed on the last day or worked 500 hours." That's NOT a last day provision, so anyone with 500 hours has earned the right to the existing formula, and it is too late to amend.

You could adopt a new plan and merge as of 1/1/16.

Ed Snyder

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I think the allocation language was posted in a way that we wouldn't normally state it:

eligible to receive allocation if employed on the last day of the plan year or if terminated, worked more than 500 hours during the year

that boils down to "employed on the last day or worked 500 hours." That's NOT a last day provision, so anyone with 500 hours has earned the right to the existing formula, and it is too late to amend.

You could adopt a new plan and merge as of 1/1/16.

Yes that allocation language is designed to make sure the plan always passes coverage. Bird is correct. Someone who terminated and worked >500 hours already has a right to an allocation.

I think it is best to make the change effective 1/1/2016.

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