Amending plan to New Comp

[Guest chris4013]

I want to amend a plan to a new comp effective 1/1/03. The plan has a last day requirement but no service requirement. Can they do it? I thought the last day requirement would allow for a change in the allocation.

[AndyH]

Have the conditions necessary to receive a contribution been satisfied by anyone yet? If yes, then the answer is no. If no, the answer is yes. If the plan requires employment on the last day of the plan year, then the IRS takes the position that such condition has not been satisfied.

[Mike Preston]

While not necessarily easy to determine, if somebody has earned a right to a benefit today, it is because of termination due to death, disability or retirement. It IS possible to determine how much that person would have gotten based on the total contribution for the year, allocated in accordance with the original allocation provision. As long as the new comp allocation provides that same level, I think the amendment to new comp shouldn't be viewed as a cutback.

[Guest chris4013]

Going further, What about a match formula that requires a last day of the plan year. Based on this discussion it seems that since they have not met the accrual requirements as of the date of the amendment then we could amend to a discretionary, and get out of making a match. However something doesn't seem right about a participant defering with an expected match.

Could they amend to a discretionary formula under the above scenario?

[Blinky the 3-eyed Fish]

The same principles apply as with your initial question, so the answer is yes.

[AndyH]

Nice picture!

[Blinky the 3-eyed Fish]

Thanks, it's new. It took me 10 minutes to find on the internet. I wanted you all to get a look at whom you were dealing with. I AM A RADIOACTIVE FISH!

[Mike Preston]

Nice picture!

Indeed!