Ineligible Participants

[Guest HHR]

In this current plan year the Employer has enrolled 3 employees prior to their meeting the 1 year of service and age 21 eligibility requirements. Plan is a prototype 401(k) using the Safe Harbor Match contribution and a Profit Sharing contribution. Employer wants to keep the 1 year of service and age 21 requirement. Can the Employer amend the plan for only this year to a shorten the eligibility period (90 days of service) for only the deferral and safe harbor match to allow these employees to be eligible this year for deferrals and the safe harbor match only. These employees would still be required to meet the 1 year of service requirement to receive a profit sharing or discretionary match. Then could the employer amend the plan prior to the beginning of the new plan year to revert back to the 1 year of service for entry into the plan for all employees hired during or after this plan year. Is the employer required to go through one of the DOL correction programs for these amendments to its prototype plan.

[Brian Gallagher]

First of all, does your prototype allow for dual eligibility characteristics? Our new prototype allows for this, but our previous one didn't.

[Tom Poje]

See the latest EPCRS, 4.06

In the case of a plan amendment under SCP,....the determination letter MUST be submitted......

emphasis mine. It is not a matter of simply amending, you have to submit for the determination letter as well.

Yes you could limit the corrected eligibility period just to the year in question.

also, you indicated that 3 employees were enrolled early.

Are there other employees under the same conditions (e.g. 90 days) who were not enrolled early? Without researching it further, you possibly have an issue of having to provide a make up deferral and safe harbor match for them as well.