Jump to content

Eligibility provision


Recommended Posts

Hi,

In a DB Plan Document (the plan uses a Safe Harbor benefit formula), in the eligibility section, are the following provisions:

"(1)           Eligible Employees. For purposes of Section 2.1(b), all Employees are Eligible Employees except for the following ineligible classes of Employees:

(A) Union Employees; (B) Non-Resident Alien Employees; and (C) Employees not listed on Exhibit A."

For each plan year the Exhibit A is updated to list the employees that are eligible and all employees that are not listed are ineligible . The plan covers,  each year, enough employees to cover 410(b) and 401 (a)(26) each year. A new Exhibit is created for each plan year , and the document contains the yearly Exhibits. Are there any potential issues with this method? Thank you very much for your insights.

Link to comment
Share on other sites

I don't have a problem with definitely determinable benefits. If you follow the document the benefits are definitely determinable. What I do have concerns about is a bit more esoteric. 411 d6 provides that a pattern of amendments may give rise to required continuations. For example if a participant is listed on exhibit a 3 years in a row does that establish an expectation of being on exhibit a in the fourth year? I told you it was esoteric.

  • Like 1
Link to comment
Share on other sites

On 9/15/2021 at 5:33 PM, Mike Preston said:

I don't have a problem with definitely determinable benefits. If you follow the document the benefits are definitely determinable. What I do have concerns about is a bit more esoteric. 411 d6 provides that a pattern of amendments may give rise to required continuations. For example if a participant is listed on exhibit a 3 years in a row does that establish an expectation of being on exhibit a in the fourth year? I told you it was esoteric.

Thank you very much. 

Link to comment
Share on other sites

On 9/16/2021 at 9:03 AM, Bird said:

Whether it is a definitely determinable issue might depend on when this exhibit is drafted - and is it signed?  In any event I wouldn't do it.

 

edited for spelling

Thank you very much. If it's drafted before anyone accrues a benefit for the year, ie prior to working 1,000 hours (by March, or early April)? Also, if the sponsor (company) signed the document and agreed to this provision, of having a yearly exhibit, would they still have to sign each year?  Thank you.

Link to comment
Share on other sites

On 9/15/2021 at 5:33 PM, Mike Preston said:

I don't have a problem with definitely determinable benefits. If you follow the document the benefits are definitely determinable. What I do have concerns about is a bit more esoteric. 411 d6 provides that a pattern of amendments may give rise to required continuations. For example if a participant is listed on exhibit a 3 years in a row does that establish an expectation of being on exhibit a in the fourth year? I told you it was esoteric.

Thank you. If the sponsor (company) signed the document and agreed to this provision, of having a yearly exhibit, would they still have to sign the exhibit  each year-meaning signed each year prior to anyone working 1,000 hours, prior to accrual of  accrual of benefits, or it is not necessary ?  Thank you very much

Link to comment
Share on other sites

2 hours ago, SSRRS said:

If it's drafted before anyone accrues a benefit for the year, ie prior to working 1,000 hours (by March, or early April)? Also, if the sponsor (company) signed the document and agreed to this provision, of having a yearly exhibit, would they still have to sign each year? 

I'm going to say I don't know because I wouldn't do it this way.  You are effectively amending the plan document by drafting each exhibit, and in my world I don't see how it can't be signed (before 1000 hours are worked).  But I would control all of this through profit sharing contributions, not CB credits.

  • Like 1

Ed Snyder

Link to comment
Share on other sites

49 minutes ago, Bird said:

I'm going to say I don't know because I wouldn't do it this way.  You are effectively amending the plan document by drafting each exhibit, and in my world I don't see how it can't be signed (before 1000 hours are worked).  But I would control all of this through profit sharing contributions, not CB credits.

A26 can't be controlled with profit sharing contributions.

Link to comment
Share on other sites

2 hours ago, Bird said:

I'm going to say I don't know because I wouldn't do it this way.  You are effectively amending the plan document by drafting each exhibit, and in my world I don't see how it can't be signed (before 1000 hours are worked).  But I would control all of this through profit sharing contributions, not CB credits.

Thank you. I just want to point out that this is a traditional DB, not a CB Plan.

Link to comment
Share on other sites

15 hours ago, Mike Preston said:

A26 can't be controlled with profit sharing contributions.

14 hours ago, SSRRS said:

Thank you. I just want to point out that this is a traditional DB, not a CB Plan.

Got it, I jumped to a conclusion or just didn't pay attention.  Still seems like a bad way to control eligibility.

Ed Snyder

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...