Removal of in-service provision

[Guest amybu99]

If a profit sharing plan amends the plan to remove its in-service provision is this considered a cut-back in benefits?

[J Simmons]

If by in-service provision you refer to a provision for allowing in-service distributions of benefits and now you want to stop that, it is a prohibited cut-back of a protected benefit, right or feature. You may now stop such access as to future accruing benefits, but not as to those already accrued.

[Guest amybu99]

Right now the provision states that an in-service distribution can be made to an active Employee who has been a Participant for at least 72 months, and who has attained the age of 45.

You're saying that the provision can be amended to state that any benefits that accrue after, let's say, June 1, 2008 will not be available for distribution but benefits accrued prior to June 1, 2008 are still available for distribution to those currently employed participants who are 45 or over. Did I interpret that correctly?

Is there a reg or code section that would support this?

[John Feldt ERPA CPC QPA]

In 411?

IMHO, I do not agree that the provision is only protected for those who are already 45, but that it is protected on a broader scale.

I think any existing account balance (or benefits accrued) before the amendment is executed (or is effective, if later) can grow into this in-service distribution option. For example, someone age 30 with 24 months of service has a $2,000 balance. That balance has certain distribution rights attached to it. If the participant ever attains those necessary conditions which were riding along with that balance, then I believe those distribution rights also apply to that balance. When they turn 45, then that portion of their balance should be eligible for the in-service. That's my approach anyway, FWIW.

[J Simmons]

I agree with J4FKBC's application to the more specified facts and question.

[Guest amybu99]

Thanks!