Protected Benefit

[Gary]

A plan provides for participation after 21 & 1.

The employer is a husband and wife and one common law employee.

The employee is hired 1/10/2009 and would be eligible for DB plan on 7/1/2010.

They also have a profit sharing plan.

On 6/20/2010 (just before employee is eligible) they amend plan to change eligiblility to 21 & 2 and to only include shareholders. Thus the common law employee would never enter DB plan.

If such a plan provision were incorporated prior to an employee being hired it would seem perfectly acceptable.

However, this amendment was done after date of hire and before date of participation.

Is such an amendment allowed? I haven't found much in the way of plan amendments during the period between hirre and participation.

Thanks.

[rcline46]

The 21 and 2 is ok, and the person is out until 1/1/2011. Only shareholders does not work under 410(b) and 401(a)(4). As of now the person is eligible.

[SoCalActuary]

The 21 and 2 is ok, and the person is out until 1/1/2011. Only shareholders does not work under 410(b) and 401(a)(4). As of now the person is eligible.

Why do you say 1-1-2011?

The participant reaches two years on 1-10-2011, so the next entry date is 7-1-2011.

[david rigby]

Is such an amendment allowed?

411(d)(6) protection is focused on the "accrued benefit of a participant". A non-participant has no accrued benefit.

[rcline46]

Read the rules on 2 year eligibility. I am assuming the person had 1000 hours in 2009 and 2010, so they actually will enter on 1/1/2011. 2 year eligibility has some peculiar rules you need to be familiar with in order to use it.

[Gary]

they plan to meet 410b and 401a4 by providing a large profit sharing contribution to the employee. so maybe they can do it.

[Guest Sieve]

rcline-- What are the special rules for the 2-year of service eligibility requirement? As far as I know, there is no shift to plan year & the employee must complete 2 y/s from hire date. So, I also think 7/1/2011 should be the participation date.

[John Feldt ERPA CPC QPA]

Check the document. If it uses elapsed time instead of 1000 hours for eligibility, without a shift in the eligibility computation period, then they do not enter yet as of 1-1-2011.