mming Posted September 20, 2021 Share Posted September 20, 2021 A plan that currently permits profit sharing allocations to participants with 1,000 hours wants to add a last day requirement effective 1/1/22. I believe that not having a last day requirement is not a protected benefit, so the amendment would be OK? Is this correct? Link to comment Share on other sites More sharing options...
Lou S. Posted September 20, 2021 Share Posted September 20, 2021 You can absolutely add it for 2022. I'd probably want to do it before 2022 starts but as long as you do it before anyone works 1000 hours in 2022 you could still do it then. Luke Bailey 1 Link to comment Share on other sites More sharing options...
BG5150 Posted September 21, 2021 Share Posted September 21, 2021 Just out of curiosity, what is the profit sharing formula? Is it grouping method? Pro rata? Integrated? Why not just make it grouping method with everyone in own group. This way you can just do away with stated conditions for a PS and artificially add them in as needed. Bill Presson and Luke Bailey 2 QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left. Link to comment Share on other sites More sharing options...
Jakyasar Posted September 21, 2021 Share Posted September 21, 2021 BG5150, could you please elaborate on your statement, trying to understand it (sorry late in the day) Link to comment Share on other sites More sharing options...
BG5150 Posted September 22, 2021 Share Posted September 22, 2021 If everyone is in their own group with no conditions, everyone technically qualifies for a profit sharing. But it's up to the sponsor to allocate it. They can choose to not give it to those not employed on the last day of the year. Or those with less than 1,000 hours. (Or both!) But, say a valued employee who was there for many years "retires" in December at age 62 and the owners want to reward her for her service. If the last day is hard coded, they would have to do an 11-g amendment to give her anything. In the case of individual groups and no conditions, they can choose to give her something. But if they start making arbitrary decisions, I think they lose the ABT to pass coverage. I can count on one hand the number of plans I've had to use the ABT for coverage. (Can still use it for nondiscrimination testing, though). Hope this helps. QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left. Link to comment Share on other sites More sharing options...
Jakyasar Posted September 22, 2021 Share Posted September 22, 2021 Now I see where you are coming from and thank you for the explanation. However, I am not sure you can do an 11g amendment just because you want to give a contribution for the 62 year old even if with individual group approach. 11g is a corrective amendment and used if plan fails testing. I agree that additional contribution can be provided if no conditions. Hopefully I did not misunderstand what you are trying to explain. I like passing ABT as it makes 401a4 testing easier to pass, at least for my plans. Link to comment Share on other sites More sharing options...
Mike Preston Posted September 22, 2021 Share Posted September 22, 2021 2 minutes ago, Jakyasar said: Now I see where you are coming from and thank you for the explanation. However, I am not sure you can do an 11g amendment just because you want to give a contribution for the 62 year old even if with individual group approach. 11g is a corrective amendment and used if plan fails testing. I agree that additional contribution can be provided if no conditions. Hopefully I did not misunderstand what you are trying to explain. I like passing ABT as it makes 401a4 testing easier to pass, at least for my plans. You need to review the requirements for an 11g amendment. There is not now nor has there ever been a requirement to fail testing before invoking 11g. Bill Presson 1 Link to comment Share on other sites More sharing options...
Jakyasar Posted September 22, 2021 Share Posted September 22, 2021 I guess I do need to revisit. Hardly use it so rusty. Thank you for pointing out. Link to comment Share on other sites More sharing options...
mming Posted September 22, 2021 Author Share Posted September 22, 2021 That's a good thought BG, but that kind of generosity doesn't exist with this employer - quite the opposite. This is a takeover and now that they need to have a restatement done, they would like to tighten up as many provisions as possible - does anyone know of a source available that lists which benefits, rights and features are protected and can't be eliminated or reduced? Link to comment Share on other sites More sharing options...
Jakyasar Posted September 24, 2021 Share Posted September 24, 2021 Hi Mike I reread the 11-g regs again and my take is a bit different than yours, as it has been in the past (11-g(2)) however as I seldomly use it (only when the testing fails), it is what it is, no further comments on my end. If I missed anything else, my apologies. Going back to BG5150's explanation to me "But, say a valued employee who was there for many years "retires" in December at age 62 and the owners want to reward her for her service. If the last day is hard coded, they would have to do an 11-g amendment to give her anything". Out of my curiosity and lack of experience in the above situation as explained by BG5150 (may be I am misunderstanding as well), please note that following question. I am assuming that she retired in December but before the 31st. Let's assume that the plan has last day rule and 1000 hour requirement for someone retiring during the year for an allocation. Unless there is an exception for a participant who is retired during the year (like no last day rule and/or no 1000 hour requirement), can you use 11-g amendment and go back retroactively provide an allocation just because the plan sponsor wants it, based on plan allocation provisions assumed above? Again, i hope I did not misunderstand BG5150's explanation, somehow. Thank you. Link to comment Share on other sites More sharing options...
Mike Preston Posted September 24, 2021 Share Posted September 24, 2021 Yes. Link to comment Share on other sites More sharing options...
Jakyasar Posted September 24, 2021 Share Posted September 24, 2021 Interesting, I am curious, is this because a retiring participant or applicable to any participant just because the plan sponsor wants to give more money? Assume that no test is failing, it is just "I like you and will give money even if you are not satisfying the provisions"? What section that allows this, I probably missed it during my reading (sorry very busy with the AFTAPs at this time, limited time to check all) Thank you for indulging my curiosity. Link to comment Share on other sites More sharing options...
C. B. Zeller Posted September 24, 2021 Share Posted September 24, 2021 1 hour ago, Jakyasar said: Assume that no test is failing There are lots of testing options. If you have a test that's passing, there's probably a different way you could run the test to make it fail, if you feel it's important to show a failing test result before proceeding with an -11(g) amendment. To put it another way, there's nothing that says you have to test under every possible combination of cross-testing, average comp, accrued-to-date, permitted disparity, standard interest rate and mortality tables, restructuring, permissive aggregation, disaggregation of otherwise excludable employees, and probably a handful of other testing options I'm not thinking of, and then only if every single one of those tests fails, are you allowed to proceed with the amendment. Bill Presson 1 Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance. Corey B. Zeller, MSEA, CPC, QPA, QKA Preferred Pension Planning Corp.corey@pppc.co Link to comment Share on other sites More sharing options...
Mike Preston Posted September 24, 2021 Share Posted September 24, 2021 There are requirements specified in section 11 G3. If you satisfy those requirements you're good to go. Those requirements do not include a requirement to fail a test. So you could even use an 11 g amendment on a plan that covered n h c es only. Link to comment Share on other sites More sharing options...
Jakyasar Posted September 24, 2021 Share Posted September 24, 2021 C.B. and Mike, thank you both for your educational explanation. Very interesting approach. Link to comment Share on other sites More sharing options...
chc93 Posted September 24, 2021 Share Posted September 24, 2021 For me, the issue has always been, and will always be, that the "title" of 1.401(a)(4)-11(g) is "Corrective Amendments". This implies the amendment is correcting a failure... but this was not the intent of this section (never the intent? - I rely on Mike for this). Link to comment Share on other sites More sharing options...
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