§401(a)(13) Issue

[chris]

Employer maintains PSP with cross-tested allocation formula which provides for various classes of participants based on various objective factors. Employee would presently fall into one of the classes, however, Employer and employee want to provide in employment agreement that employee will agree to forego x% of retirement contribution based on various factors which are to be looked at upon year-end. Looks like such an agreement would not only be pre-empted by ERISA, but would also be in violation of IRC §401(a)(13) as to the qualified status of the PSP. Anyone see any other issues with this? Thanks.

[Kevin C]

I would also be concerned that the arrangement might cause the PSP to be considered a CODA since it is not a one-time irrevocable election 1.401(k)-1(a)(3)(v).

[rcline46]

For heaven's sake man - amend the plan to put everyone in their own group!

[chris]

That was my initial suggestion to at least create a separate group for this employee based on potential issues I saw, but Employer wanted to know why it could not go the employment agreement route and why such an amendment was necessary. Just trying to gather additional substantive reasons...