anti-cutback implications

[Guest medinael]

We have a sole proprietor client with one employee that wants to increase the initial eligibility period in the 401k plan on the eve of the employee's satisfaction of the current eligibility period. Aside from being nasty, is there an anti-cutback problem? - or does eligibility not count as an accrued benefit?

[JanetM]

Seems like silly thing to do unless there is ER contributions. Something says you can't make them wait more than a year to defer their own pay or at age higher than 21. cites are 401(a)(1)(A)(i) and 401(a)(1)(B)(i).

Be careful here, employees must be allowed to defer, but ER can avoid ER contributions for two years. But if eligiblity for ER is 2 years you can't impose vesting schedule.

[david rigby]

IRC 411(d)(6) applies to participants, not to employees.

[KJohnson]

I agree no 411(d)(6) problems. I haven't gone back and looked at the reg, but you might want to see if there could be an "amendment timing" issue under 401(a)(4). The timing of amendments cannot signficianly favor HCEs. If the company makes a profit sharing contribution that the HCE would have to "share" with the NHCE but for the new amendment, there might be a 401(a)(4) issue...then again there might not.