Can an employer amend a profit sharing plan midway through a given plan year to add a last-day-of-the-year employment requirement as a condition for receiving a profit sharing contribution?

[billfgrady]

Can an employer amend a profit sharing plan mid-way through a given plan year to add a last day of the year requirement as a condition for receiving a profit sharing contribution? In other words, can this be retroactively effective within a given year?

Ordinarily, I would assume the answer would be no, but what if the "employees" in a given setting are actually affiliated employers responsible for making their own profit sharing contributions, the employee is terminating service prior to the end of the year and does not want to make a contribution.

Any advice or cites on this?

[Blinky the 3-eyed Fish]

See 411(d)(6). You cannot take away something that is earned. So, in your case if the employee had earned the right to the contributon already, then you cannot now impose a last day requirement. Where you could impose it is if say there was a 1,000 hours requirement and no employee had worked 1,000 at the time the last day provision was implemented.

[Guest carsca]

You should also consider whether the existing profit sharing contribution is discretionary. If it is, you would have a better argument for imposing a LDPY requirement.

[Alf]

If the PS cont is discretionary, don't make it for 2003 for anyone. Instead amend the plan to add a new contribution type (call it a nonelective cont or something like that) with all of the formalities (eligibllity requirements, allocation rules (including the LDY condition), vesting, etc.).