Profit sharing wants to add end-of-year employment rule

[CharlesLeggette]

A PSP [calendar year] wants to add here in 2013 an EOY employment requirement to Plan. Plan has a 1,000 requirement. Deep in the recesses of my brain a little bird said...whoa--not so fast....any thoughts on this...is it doable.

[rcline46]

For anyone who has already worked 1,000 hours - they have accrued the right to the contribution. Only those with fewer hours would be affected this year.

[cpc0506]

I agree with rcline46.

As an aside, what if a plan offers Profit Sharing with 1000 hours AND last day requirement. The Plan currently uses a pro-rata allocation formula. Client wants to change to New Comparability for 2013. Can this be done or have employees already accrued a benefit under the pro-rata formula?

[rcline46]

They have not reached the 'last day' and therefore have not accrued the right to a contribution under the old formula. One caveat - if no requirements are needed for death, disability, or retirement (fairly common) then should one of these occur, they have accrued under the old formula.

[cpc0506]

Good point about the death, disability and retirement issue. I did not even think about that. How would you address this then?

Suppose under the New Comp allocation, the HCE gets 9% and all others get 3%. What precentage would you have to give to those who left for death, disablity or retirement reasons?

[rcline46]

For simplicity, say the old formula was pro-rata based on comp. I would determine what the pro-rata amount would have been based on the final allocation, and give that percentage to those particular participants.

Obviously the there is no hard guidance, and others may think my methodology is not correct based on their interpretation ot the situation.

[CharlesLeggette]

BTW, they also want to chamge from pro-rata to New-comp ....same issues I assume???

[12AX7]

Yes.