Can current participants be amended out of the plan

[jkharvey]

The plan currently does not exclude any class of employees and has the standard 1 yos/ 21 yoa eligibility requirements. The plan wants to amend to exclude a specific group of employees (Nurses). These are all HCEs, so testing is not an issue. I understand that eligibility is not a protected benefit, but can these people now be excluded if the plan is amended?

[ETA Consulting LLC]

I understand that eligibility is not a protected benefit,

You just answered your own question

As long as the plan continues to pass 410(b), it wouldn't be a problem; since this amendment would not violate IRC 411(d)(6).

Good Luck!

[12AX7]

You also need to mindful of a possible partial termination issue, if there were employer contributions allocated to the group that is now exempt from participation.

[ETA Consulting LLC]

You also need to mindful of a possible partial termination issue, if there were employer contributions allocated to the group that is now exempt from participation.

Not sure about this. They are merely being excluded from receiving additional contributions to the plan. They are, however, still employed and having their vesting service tracked under the normal provisions. I would agree with you if they were actually terminated and precluded an opportunity to work the additional years of service to increase vesting.

Good Luck!

[12AX7]

There's been commentary on this issue over the past few years. Take a look at ASPPA ASAP 07-14.

[401QUE]

I have a client that made such an amendment (to exclude interns), effective 10/1/2012. Their intention was to only exclude newly hired interns, and allow existing interns to continue participating (NEC and SH Match being made each year). Should - or could - they have specified this in the amendment, or is it absolute in excluding future and existing interns? Or given the effective date, was it assumed it only applied from that date forward?

Thanks!

[david rigby]

Should - or could - they have specified this in the amendment, or is it absolute in excluding future and existing interns? Or given the effective date, was it assumed it only applied from that date forward?

Clarity is always important. Consider this: an ambiguous plan provision will generally be interpreted (by IRS, DOL, courts) in favor of the participants. This is the reason ERISA requires a plan document be in writing.

[BG5150]

But there is nothing saying they can re-amend and put in the clarification.

[ESOP Guy]

To answer your questions: they could have written the amendment to read something like "all intern hired after 10/1/2012 can not enter the plan...."