Change to different allocation group before end of year

[Trekker]

Our client has a 12/31 cash balance plan and makes deposits monthly. Each partner is in his own allocation group by name, with his dollar amount specified in the document, and non-partners are in the rank and file group, getting a percentage of comp that is specified in the document. As of Dec 1, 2011, one partner will no longer be a partner but will be in the rank and file group.

He has accrued the benefit for the year (1000 hours). Is there any way he can jump to the staff group for one month of 2011 and get the staff percentage for that one-twelfth of the year? The client is willing to make this effective January 1, 2012, but asked that we check to see if the change can be made Dec 1.

I've never dealt with this question and will probably end up with the January 1, 2012, date, but appreciate any thoughts. We will also need the 204(h) Notice.

Thanks.

[Effen]

This is a document issue. How does the document define the group? If it is really by name, it seems it would be hard to argue he should be in a different group.

You can always amend the plan and move him into the rank & file group prospectively, but you would need to give him a 204(h) notice and amendment couldn't take effect for 15/45 days depending on the size of the plan.

[Trekker]

Agreed. Thanks for weighing in.