Employer wants to reduce prior discretionary contrib

[Guest bevb]

Can an Employer change the amount of its contribution for the year after the fact?

It is a not-for-profit organization with a 401(k) plan. The employer put in a 22% contribution and wants to reduce it to 15% of payroll.

Their year ended June 30, 2008.

Can the excess be applied to the next year or can it be withdrawn from the plan?

[ERISAnut]

Loaded question. Deposit timing and allocated contributions are two distinct things, especially when the deposit is made after the year end. Therefore, part of the contribution may be considered as allocated to the prior year (i.e. 15%) while the other 7% may be a prefunded amount for the current year.

Here's the rub, where were the contributions actually deposited. If these funds were placed into the individuals accounts, then you have opened a can of worms where the argument is that the amount was allocated (and a minds changed) and now the employer wants the money back. This would appear to undermine the entire purpose of ERISA.

Again, this is a loaded question. Detailed fact pattern please.

[Guest bevb]

It looks like some of the money went into the pooled investment account after the end of the plan year so that amount is going to be attributed to the next plan year. I believe they have decided to leave the other amounts as is.

The discretionary amount is allocated on the year end statements for the individuals-those have not been issued.

Thanks for your help-bevb