Eligibility Amendment

[Guest xaviote]

Cross tested plan

Defined benefit has an eligibility classification by job categories.

2004, 2005, 2006 Lab Assistant A is eligible for the defined benefit plan

2007 Lab Assistant A is not eligible for the defined benefit plan

Since Lab Assistant A is not eligible for the db plan in 2007 does that mean that they don’t receive any additional contributions and their accrued benefit is based on what they accrued for 2004-2006. The plan documents state yes.

However, they would participate in the 401(k) plan now and receive a lesser profit sharing contribution.

Is there some discrimination rules that would apply here? Such as once you're in the defined benefit plan you're stuck unless terminated from the company.

[Blinky the 3-eyed Fish]

There is no such rule. Eligibility is not a protected benefit and can be removed. You of course need to pass 410(b) and 401(a)(4).

[Guest xaviote]

If this was a small plan. And the purpose behind making the participant ineligible was so they wouldn't have to pay a large contribution to the DB plan for that participant, since the DC discretionary contribution to pass 401(a)(4) is smaller then what the projected benefit contribution needs to be. Can the participant complain to the DOL about getting a smaller contribution? Would the DOL choose to protect the participant?

[ak2ary]

You might be a little concerned if Lab Assistant A is the oldest NHCE, as to whether the IRS/DOL would look at age discrimination. This type pf attck is often rumoured but, in my experience, rarely if ever used.

[SoCalActuary]

You may have just become a party to the potential lawsuit by describing their motive as:

"And the purpose behind making the participant ineligible was so they wouldn't have to pay a large contribution to the DB plan for that participant"

Are you willing to state that you heard that position expressed by the plan sponsor? Yikes! Don't work on

plans of my clients, please.

[Dougsbpc]

Is it really possible to exclude participants from a DB plan when they have been eligible and have accrued benefits in the past? What if the plan is top heavy and the future excluded group are HCE's but not key employees? Wouldnt they have to receive top heavy minimums?

In this case there are four junior partners (all in their 40's and each currently have 5% interest but not more than 5%). They are buying into the partnership and will eventually have full ownership. They, as a group, have expressed an interest in not being covered under the DB plan for the next five years. This because much of their incomes are going to buy out current partners and as part owners they are responsible for some of their own benefits.

Our understanding was that you could have different benefit levels for different groups of participants, but you could not exclude entirely a participant or group of participants who have already accrued benefits.

[Blinky the 3-eyed Fish]

Being eligibility is not a protected benefit, you can certainly kick them out prospectively and give them nothing other than what they have earned to date. Where does your opposite understanding stem from?

[AndyH]

If you tell your dog that he is a cat and deny him dog food he is still a dog but gets no more dog food. But does he get that minimum top heavy benefit of water? Don't think so but I'm not completely sure.

[Blinky the 3-eyed Fish]

Andy, I see your business is advertising for actuaries around the country to set up "virtual offices". Well I want to be a "virtual actuary". I will send you a picture for you to ask questions. When the answers appear to you after being inspired by my thoughtful gaze, you folks can send me my monthly stipend.

Oops, sorry I edited the wrong post, but I can't clear my tracks. Amazing power.

[AndyH]

Thanks for the picture Blinky; if you don't mind I'll post it so we know what you really look like.

BTW Blinky, Does this guy have "Being eligibility?" Is that like "street cred"?