Statutory Exclusions

[Guest RS Vatalaro]

A plan sponsor's intent has always been to exclude collectively bargained employees and non-resident aliens from plan participation. Plan sponsor is a controlled group with two other companies whose employees are not allowed to participate in the plan. One company is comprised solely of collectively bargained employees and the other is a Canadian company where all employees are Canadian citizens.

Plan sponsor uses a standardized prototype, which has check boxes for these statutory exclusions.

Unfortunately these checkboxes were left un-checked in the adoption agreement. The plan document is being restated to another standardized prototype (provided by new investment carrier). Is it OK to check the statutory exclusion boxes in the new document? Or is this an illegal cut-back of rights, benefits and features?

Thanks for any help.

[Guest Kaye Mitchell]

You are correct in your concern that this is a "cutback". It is an element of protected benefits in that it changes the particulars that need to be satisfied with regard to accrual of benefits. You may "cut back" as to future accruals, but you may not go retroactive, and depending on the type of plan, the cut-back may not take effect until a proper amendment and notice of cut-back is given. Therefore, unless a last-day requirement saves you, it is my understanding that you have to give an accrual to any employee in the currently broad class of employees who has already satisfied any hours requirement, at least with regard to the compensation earned during this plan year up to the date of cut-back. You should get this conclusion confirmed by other experts also, since there is no out-and-out declaration of this rule.

[Kirk Maldonado]

This exact topic was covered in a recent Reish & Luftman newsletter that I think is available here on BenefitsLink. If my recollection is correct, the title of the article included something like "One Man's Boilerplate" in it.