Plan Entry Date Modification

[Fred Payne]

Company A's 401(k) PS Plan currently requires 1 Yr of Service, 1,000 hours for eligibility. Plan Entry date is the first day of the year in which eligibility requirements are fulfilled. Thus, entry is retroactive. Company A would like to amend its plan such that Entry Date is now the following January 1 or July 1.

Will such an amendment only affect those hired after the date of amendment, or will those existing employees as of the date of amendment who have not yet fulfilled the 1 yr, 1,000 hours be subject to the new Entry Date as well?

Thanks.

[Mike Preston]

You can do it either way in the amendment that is adopted making the change. There is a court case where an auto body's (I think it was an auto body sponsor) plan was amended to change the entry date twice, each time just before a specific individual would have entered the plan. The plan sponsor won the case, as I recall.

But the moral of the story is that making such a change might be challenged by somebody. If it is, even if the plan sponsor wins, one has to wonder if it is worth the effort.