In-service withdrawals of profit sharing balances

[Beltane]

Employer wants to amend a 401(k)/PS plan to allow for in-service withdrawals of profit sharing balances at age 50. However, the demographics would only allow 3 people to take advantage of this, 2 of which are HCE's...the remaining NHCE's would not have access to this benefit and the provision would fail the general non discrimination test (70%). The HCEs are ages 53 and 52, the NHCE over 50 is age 58. Seems it would be better to amend the definition of Normal Retirement Age to age 55 and allow these withdrawals upon attaining NRA - the 58 year old NHCE is really the one who needs the non hardship withdrawal. Comments anyone?

[ETA Consulting LLC]

Employer wants to amend a 401(k)/PS plan to allow for in-service withdrawals of profit sharing balances at age 50. However, the demographics would only allow 3 people to take advantage of this, 2 of which are HCE's...the remaining NHCE's would not have access to this benefit and the provision would fail the general non discrimination test (70%). The HCEs are ages 53 and 52, the NHCE over 50 is age 58. Seems it would be better to amend the definition of Normal Retirement Age to age 55 and allow these withdrawals upon attaining NRA - the 58 year old NHCE is really the one who needs the non hardship withdrawal. Comments anyone?

The provision, as amended, would allow every participant a distribution of those balance at age 55. This amended couldn't be taken away. So, there is consistency there; it's just several employees are already 55. I don't think this crosses the line of BRF. The plan provision currently and effectively provides everyone the right to a distribution at age 55. The fact that it does not provide everyone a effective right to a current distribution isn't a problem

Good Luck!

[Bird]

I agree with ETK that it's not a BRF issue and is ok. If it's really only the 58 year-old who is being targeted, I would prefer the NRA-at-age 55-with in service withdrawals solution on general principle, but either is ok.