Amending Groups for 2011

[HarleyBabe]

I have several sets of groups. All state 1000 hours to receive an allocation with the exception of a few. The exact situation is that I have 4 partners in a group and all want something different, allocation wise. I therefore was going to amend the groups to place each highly paid participant in their own group, problem solved for 2011. Side note - It is a calendar year plan

I was always under the impression if there was a 1000 hour requirement for your group and no one had met the 1000 hours, the groups could be amended up until that point.

My colleague is stating that the group can not be amended after the first day of the plan year. If that is the case, can someone point us the direction of where the law states the rules regarding this so we can read the provision. My colleague can't seem to find it and says he's is not really 100% positive either.

Thanks

[Lou S.]

I agree with you but don't have a cite, sorry. I've always heard the IRS position is that you can amend up until the time at least one participant has earned the right to the benefit. So if 1,000 required you can amend up until the point someone is credited with 1,000 hours. If you have a last day requirement, I think you can amend up until the last day of the year.

Of course it is possible the IRS has chancged its mind since last I heard them express this opinion.

[K2retire]

Years ago I heard really aggressive folks take the position that until a profit sharing contribution had been declared no one had accrued the right to a benefit. I'm pretty sure that won't fly anymore, but your 1,000 hours should be safe.

[Guest Sieve]

It's a 411(d)(6)(A) rule -- nothing has been accrued during the plan year due to the 1,000 h/s requirement, so there is no cut-back if you change the allocation or benefit formula prior to then. Look at Treas. Reg. Section 1.411(d)-3(a)(3)(i).

[12AX7]

HB -

I would be careful with a Partnership. You may run into a Deemed CODA if each partner were to elect the amount of employer contribution to receive for the plan year. If the employer is a C or S Corp and you're using the term "partner" to only identify the owners than you should not have this concern.