Amending Profit Sharing Allocation Method

[emmetttrudy]

A 401k PSP currently has a pro-rata PS allocation method with a 500 hours allocation condition (no other conditions). They would like to amend the plan to be a new comparability with each participant in his own class so they can max the owner while not having to give 13% to all employees. Their current adminsitrator is telling them they can do this at any time this year "since the profit sharing contribution is discretionary". However, we have always operated under the premise that once the participants have accrued a benefit under the exisiting allocation method (500 hour requirement, which they have all obviously met already), then they would not be able to amend this method to provide different groups of employees with different %s of PS. They would need to wait till 1/1/2013 for this to take effect. Am I missing something? Or is the current amdinistrator just giving out bad information?

[Bill Presson]

A 401k PSP currently has a pro-rata PS allocation method with a 500 hours allocation condition (no other conditions). They would like to amend the plan to be a new comparability with each participant in his own class so they can max the owner while not having to give 13% to all employees. Their current adminsitrator is telling them they can do this at any time this year "since the profit sharing contribution is discretionary". However, we have always operated under the premise that once the participants have accrued a benefit under the exisiting allocation method (500 hour requirement, which they have all obviously met already), then they would not be able to amend this method to provide different groups of employees with different %s of PS. They would need to wait till 1/1/2013 for this to take effect. Am I missing something? Or is the current amdinistrator just giving out bad information?

I agree with you.

[Bird]

I agree with you too.

There is a fix - start a new plan with the design you want and contribute to it, then merge the plans after this year.