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Participant under threshold to get allocation in 2020; options?


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We still have a lot of plans that prefer to have allocation conditions hard-coded in the plan (probably so that the SPD shows them).  For plans with an hours threshold, there are going to be a bunch of participants who normally cleared the bar that don't for 2020 because they were temporarily laid off, or were furloughed, or whatever for part of 2020 and didn't work enough hours to meet the plan threshold in 2020.

Do these plans/participants have any options (other than the plan sponsor giving them what they would have given them as a contribution outside the plan as a bonus)?  Possibly a one-year-only amendment that says that for 2020 only, the hours of service required for a contribution is lowered to X hours?

This is just speculation at this point (for me, at least), but I can see that it might cause coverage issues (in which case, we can start bringing participants back based on highest hours first, but only until 410b is passing and then no further).

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17 minutes ago, AlbanyConsultant said:

This is just speculation at this point (for me, at least), but I can see that it might cause coverage issues (in which case, we can start bringing participants back based on highest hours first, but only until 410b is passing and then no further).

I'm just speaking off the cuff here without looking into it further - if your pan has this "fail safe language" then I think you are stuck. But if it doesn't have such limiting language, it seems to me that 11(g) doesn't limit you in such a manner. Perhaps the corrective amendment (which would most likely be nondiscriminatory - I assume you are talking generally about NHCE's) could say you will remove the allocation conditions for all participants who worked more than (x) hours - or something along those lines. Don't know if others will agree - again, this is without any investigation on my part. Caveat Emptor!

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I think you can still use an -11(g) amendment to give contributions with a lower hours threshold, even with the fail-safe language.  As has been said many times over the years here and other places, -11(g) does not require any failure before it can be used, even if the section title is "corrective amendments".

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  • 2 weeks later...

The fail safe language in the plan is specifically for 410 (b). An 11g amendment can  correct not only 410(b) but 401(a)(4). It is too late to correct a failsafe provision for 2020. It is what it is.

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