amendment

[Gary]

a plan has elig of 21 & 1.

after an employee is hired (HCE) they amend elig to two years.

Is this an acceptable amendment or an illegal cutback?

It seems since he was not yet a participant and has no accrued benefit then the amendment may be permissible.

Thanks

[SoCalActuary]

Yes, it is acceptable and the IRS published an example of this fact pattern in one of their rulings. I don't recall where or when, but it goes back at least 4 years.

[David MacLennan]

I agree with SoCal. I would probably even go further and say that even if he was a participant, and even an NHCE, you could change the eligibility to 2 yrs 100% vesting and if he did not have 2 yrs of service (say he went part time after 1 year), he could be effectively kicked out of the plan (preserving any accrued benefit he may have earned of course). But, keep in mind that he may have "Non-Excludable Employee" status under the coverage regs. I believe that if any other employee entered under the 1 year rule, and if he would have entered under the 1 year rule, then he is not an Excludable Employee. At least that is how I remember those regs - double check them for yourself if you think it has an impact in your case.