Eligibility requirements and entry dates

[mariemonroe]

I have a safe harbor 401(k) Plan (3% non-elective contribution).

The employer also makes a hefty profit-sharing contribution each year equal to about 9.5% of participants' compensation.

The eligibility requirements are the usual: a year of service plus age 21, then enter on January 1 or July 1 next following completion of the service and age requirements.

The profit-sharing contribution is 100% vested from day 1.

My question: can I amend the plan to change the eligibility requirements for purposes of receiving the profit-sharing contribution to 2 years of service?

In other words, employees need only work 1 year to enter the plan for purposes of making deferrals and receiving the safe harbor contribution, but must work another year before being eligible to receive the profit-sharing contribution.

Any comments are welcome.

[JanetM]

Sure you can make two year eligibility for profit sharing but it must be 100% vested at that time. Be careful how you implement. Those already working but on in the plan are going to see it as take away. Would suggest you apply it to those hired after the effective date of the amendment.

3% NEC and be one year wait and it must be 100% vested.

Why not allow deferals from day one? Won't cost you a dime.

[Sully]

Why not allow deferals from day one? Won't cost you a dime.

Unless the plan is top heavy, which would require top heavy minnimums to be made.