Change for stricter eligibility

[Guest Peggy806]

We have differing of opinions on something and I cannot find a clear answer.

Plan currently has entry dates as of first of month after age 18 and 90 days of service.

If they change to age 21/one year of service/two times a year, how would it affect current employees. Example below:

Employee age 18, date of hire 9/5/10, so they are eligible 1/1/11.

If plan is amended effective 7/1/11 to age 21, 1 year of service, etc. Does this employee get grandfathered in as eligible or does their eligibility date change to keep them out until age 21, etc?

I thought they could not be made ineligible after they had become eligible, but I have been wrong about things before.

[Guest Peggy806]

I am replying to my own post. The person who was disagreeing with me has realized that I was right.

but let me give you another example:

Employee hired 12/18/10 and plan is amended 1/1/11. They would have been eligible 4/1/11. Do they go by the old rules or by the new rules effective 1/1/11.

Sorry for the confusion.

[12AX7]

Eligibility is not a protected right in a plan. It is possible to turn a previously eligible employee into an ineligible employee through a plan amendment.

[Jim Chad]

I agree with 12AX7. A common example is when someone moves to a division that is excluded. They do get kicked out. In your example, unless there is wording in the amendment to grandfather them, I believe some people who were eligible will become ineligible. If they have money in the Plan they will still be counted as Participants for the 5500.

In your example, the new rules count unless grandfathering says old rules apply to anyone employed on ______ date.

[Guest Peggy806]

I agree with 12AX7. A common example is when someone moves to a division that is excluded. They do get kicked out. In your example, unless there is wording in the amendment to grandfather them, I believe some people who were eligible will become ineligible. If they have money in the Plan they will still be counted as Participants for the 5500.

In your example, the new rules count unless grandfathering says old rules apply to anyone employed on ______ date.

Are you saying that in the very first example, the plan could make someone ineligible after they had been eligible and participating in the plan because of a stricter eligibility requirement? I understand them not being eligible if they are transferred to a division which isn't covered, but I thought they would not be able to tell a person who was 18 that they are no longer eligible because the plan decided to go to a stricter age 21 eligibility requirement.

[Lou S.]

I agree with 12AX7. A common example is when someone moves to a division that is excluded. They do get kicked out. In your example, unless there is wording in the amendment to grandfather them, I believe some people who were eligible will become ineligible. If they have money in the Plan they will still be counted as Participants for the 5500.

In your example, the new rules count unless grandfathering says old rules apply to anyone employed on ______ date.

Are you saying that in the very first example, the plan could make someone ineligible after they had been eligible and participating in the plan because of a stricter eligibility requirement? I understand them not being eligible if they are transferred to a division which isn't covered, but I thought they would not be able to tell a person who was 18 that they are no longer eligible because the plan decided to go to a stricter age 21 eligibility requirement.

Yes you can do that, though in most cases the ee's are grandfathered into the plan to aviod the messy PR situation of telling someone they are now excluded but don't worry you'll be eligible again in 3 months.

Also if to exclude enough people people with the amendment you can run into an unfortuante partial termination situation.

[NKOTB]

I have pretty much this exact same situation. The employer would like to add a 1,000 hour requirement to their plan for eligibility, which would effectively remove part-time employees who were previously participating but who have never actually worked 1,000 hours in any year. The preapproved plan document says that amendments to eligibility can't affect participants who are already participating in the plan, but I can't find anything indicating that this restriction is legally required. Does anyone have any citations for the conclusions above before I agree with the employer that they can remove this restriction from the preapproved document?

[chc93]

try this recent thread...

https://benefitslink.com/boards/index.php?/topic/60263-changing-eligibilty-nondiscriminatory/&tab=comments#comment-267860

 

 

[BG5150]

4 hours ago, NKOTB said:

 The preapproved plan document says that amendments to eligibility can't affect participants who are already participating in the plan, but I can't find anything indicating that this restriction is legally required.

Re-read that section about the amendments.  Does it say that the amendment cannot affect the benefits accrued of those already participating?  That makes more sense.

[NKOTB]

Thank you, that thread is very helpful.  It still seems like I shouldn't be able to remove active participants just because I want to add a 1,000 hour requirement now, but I simply can't find anything that prohibits it, and it appears from that thread that there's simply nothing on point out there.

In answer to BG5150, the current document specifically states that if the plan's eligibility requirements are changed, an active participant who is still an eligible employee on the effective date of the amendment will remain a participant and his entry date will not change.  

[Tom Poje]

 there are 2 issues being discussed.

1. can you change eligibility and exclude someone who was previously eligible.  yes, even ERISA Outline Book notes that discussed in chapter 2 section VI Part e

2. does the document permit it? I'm guessing it may depend on whether you have a standardized or non-standardized document.

for example the particular  FT William document would not permit eliminating eligibility for someone already in the plan (I believe this is a standardized document.

Each Eligible Employee as of the Effective Date who was eligible to participate in the Plan with respect to Elective Deferrals and Voluntary Contributions on or before the Effective Date shall be a Participant eligible to make Elective Deferrals and Voluntary Contributions pursuant to Article 4 on the Effective Date. Each other Eligible Employee who was not a Participant in the Plan with respect to Elective Deferrals and Voluntary Contributions on the Effective Date shall become a Participant eligible to make Elective Deferrals and Voluntary Contributions on the date specified in the Adoption Agreement; provided that he is an Eligible Employee on such date. Notwithstanding the foregoing, a Participant shall be eligible to make Elective Deferrals and/or Voluntary Contributions only to the extent such contributions are permitted in the Adoption Agreement.

[BG5150]

They could always switch to a new plan document that allows it if it is of enough concern?

[NKOTB]

That's an interesting thought, BG5150.  Maybe I'll do some digging to see if I can find another preapproved document out there without this language.  I can see that it won't be a Ft William document (thanks, Tom).  I really appreciate the help! 

[RatherBeGolfing]

1 hour ago, Tom Poje said:

 there are 2 issues being discussed.

1. can you change eligibility and exclude someone who was previously eligible.  yes, even ERISA Outline Book notes that discussed in chapter 2 section VI Part e

2. does the document permit it? I'm guessing it may depend on whether you have a standardized or non-standardized document.

for example the particular  FT William document would not permit eliminating eligibility for someone already in the plan (I believe this is a standardized document.

Each Eligible Employee as of the Effective Date who was eligible to participate in the Plan with respect to Elective Deferrals and Voluntary Contributions on or before the Effective Date shall be a Participant eligible to make Elective Deferrals and Voluntary Contributions pursuant to Article 4 on the Effective Date. Each other Eligible Employee who was not a Participant in the Plan with respect to Elective Deferrals and Voluntary Contributions on the Effective Date shall become a Participant eligible to make Elective Deferrals and Voluntary Contributions on the date specified in the Adoption Agreement; provided that he is an Eligible Employee on such date. Notwithstanding the foregoing, a Participant shall be eligible to make Elective Deferrals and/or Voluntary Contributions only to the extent such contributions are permitted in the Adoption Agreement.

Tom,  I'm not reading that the same way you are.  What it says (to me) is that if you are eligible on the effective date, you enter on the effective date.  If you were not eligible on the effective date, you enter on the specified entry date if you are still an employee. I don't read that as not permitting changing eligibility.  It really just makes the effective date a "special" entry date.

[RatherBeGolfing]

1 hour ago, NKOTB said:

It still seems like I shouldn't be able to remove active participants just because I want to add a 1,000 hour requirement now, but I simply can't find anything that prohibits it, and it appears from that thread that there's simply nothing on point out there.

Well, there is nothing on point because it is not a protected benefit :) 

18 minutes ago, NKOTB said:

That's an interesting thought, BG5150.  Maybe I'll do some digging to see if I can find another preapproved document out there without this language.  I can see that it won't be a Ft William document (thanks, Tom).  I really appreciate the help! 

what is the exact language in your current document?  And I'm pretty sure FTW can accomodate this change, there is simply no reason for a provider like FTW  to restrict their volume submitter like that, and I don't eve think they have a standardized document any more.  After the next restatement there wont even be a prototype or VS document, just a pre approved document since there is almost no difference any more.

[Tom Poje]

Rather be...

I read the first sentence to say "If you were a participant before any change, you continue to be a participant..

I read the second sentence, if you had satisfied eligibility but not yet entered you have to wait until the new eligibility

(otherwise I don't see a reason for having both sentences)

 

the one plan we had with immediately eligibility was modified to

4.     Other Employees

[ X ]                Other: any Employee who is compensated primarily in tips (hired after January 1, 2009)

 

which changed nothing on anyone who met the requirements prior to 1/1/2009, but after that date it was still immediate unless you were newly hired primarily tipped. so the change was only going forward for new employees, which would seem to match NKOTBs comment

 

[Kevin C]

Our VS base document (from ASC) has a section dealing with amendments to age and service requirements. The default is those eligible before the amendment stay in, but you can subject everyone to the new requirements. 

Quote

Amendment of age and service requirements. If the Plan’s minimum age and service conditions are amended, the amendment may consider an Employee who is a Participant immediately prior to the effective date of the amendment as satisfying the amended requirements or may require all Employees to satisfy the amended minimum age and service conditions. If an Employee has not satisfied the minimum age and service conditions as of the effective date of the amendment, the Employee must satisfy the eligibility requirements as amended. This provision may be modified under the special Effective Date provisions under Appendix A of the Adoption Agreement or under a separate amendment implementing the updated minimum age and service provisions.

Is there still a way to increase the font size for text pasted in?

[RatherBeGolfing]

6 hours ago, Tom Poje said:

Rather be...

I read the first sentence to say "If you were a participant before any change, you continue to be a participant..

I read the second sentence, if you had satisfied eligibility but not yet entered you have to wait until the new eligibility

(otherwise I don't see a reason for having both sentences)

 

the one plan we had with immediately eligibility was modified to

4.     Other Employees

[ X ]                Other: any Employee who is compensated primarily in tips (hired after January 1, 2009)

 

which changed nothing on anyone who met the requirements prior to 1/1/2009, but after that date it was still immediate unless you were newly hired primarily tipped. so the change was only going forward for new employees, which would seem to match NKOTBs comment

 

They use this language in their current VS as well, so I talked to their document folks about it.  Both of our interpretations are reasonable, but yours is more conservative.  An amendment similar to what @Kevin C described could be done with the FTW document as well.

[BG5150]

Call the document provider.  They know the doc better than you or us.

 

Tell them what you want to accomplish, and they should be able to tell you if it can be done on that document or not.