Amending Discretionary Match

[pixmax]

I have an employer that wants to stop the current match. The match is discretionary and is deposited each pay period. However, they want to amend the Plan to allow for a match at year end and apply a last day rule. My concern is that employees have already accrued the benefit. They are laying off employees near the end of the year and I feel this could pose a problem if they are not given the match. Any suggestions?

[AKconsult]

I had an employer who did this several years ago. At the time, the attorney who worked with me for the plan said they could stop the pay period match mid year because the participants had only accrued the right to the match as of each pay period, so it could be stopped any time. They can then prospectively amend the plan for a year end match with allocation requirements and that match would be determined for the period between the time the pay period match was stopped and the end of the plan year.

[Kevin C]

Accrued benefits are only part of the issue. "The conditions for receiving an allocation of contributions or forfeitures for a plan year after such conditions have been satisfied" is a 411(d)(6) protected benefit. See 1.411(d)-4, Q&A 1 (d).

Another option is to have a short plan year, then start the new requirements at the beginning of the new plan year.