Eligible for a contribution?

[PFranckowiak]

Have a takeover plan that has 1000 hour, last day, except disability(total and permanent), death, NRD.

Profit Sharing.

I want to remove disability from the restated plan as sometimes you don't find out right away that it is total and permanent.

Also NRD. We don't have in any of our plans, does this mean only in the year they retire they would get a contribution, or if a participant has the met eligibility for the plan, once they reach NRD age, they are always eligible to receive an allocation ? A Person goes to PT( under 1000) hours, would they get a contribution for each of the years after turning 65, or only in the year they actually retire.

Any problem removing this upon restatement?

Thanks

P

[ESOP Guy]

You need to read your document more closely regarding retirement. I don't recall ever seeing a plan that says you get a contribution upon reaching Normal Retirement Date (NRD). It ussually says retire or maybe defines NRD as terminating after reaching Normal Retirement Age (NRA). In short I have never seen a plan give a contribution to someone every year after they reach NRD regardless of hours worked and they haven't terminated.

What I have seen is this happen:

Person works full-time and enters the plan. As they get older (often times when they are in their 60s) they move to part-time and work less then 1,000 hours. Some time after they have reached NRA (often times defined as 65) they quit and that year they worked less then 1,000 hours.

During the years they worked less then 1,000 hours but didn't terminate they do NOT get a contribution. They have not retired per the plan's definition. In that last year they terminated they have retired and get a contribution in that year.

Once again I suggest re-reading your plan definitions regarding NRD, NRA and contribution allocations. I have never seen mere age cause one to get contributions but one has to retire which is linked to terminating employment. To some degee just the dictionary definition of the word "retire" has in it the idea of leaving employment.

By the way there is ussually a way to make the disability plan provision work. Once again it often times describes how the plan administrator is to determine who is and is not disabled.

I know I am not giving a direct answer to your question but I really do think you are trying to solve a problem you don't have.

[austin3515]

I agree with ESOP guy.

Also, the only problem with restating is you need to watch out for anyone who has already retired and therefore accrued the right to an allocation. You could however make the new provision effective 1/1/2015 with no worries at all (assuming a calendar year plan).

[PFranckowiak]

Thanks.

One more question.

Person retires at 67, gets an allocation due to retiring after 65.

rehires 68, then quits again - I guess it's a second retirement after 65 s0 another allocation. (This could happen each year - quit and then want to come back because they are bored or need money)

Retail and they tend to rehire - so I want to simplify things.

[austin3515]

Yup, another allocation. I have had this predicament before and considered doing an amendment that basically says it's a once in a lifetime waiver. But unless you say it's once in a lifetime, it's every year. Another approach is, "is this person really terminated"? For example when they leave in January, is it known that they are coming back for the next holiday season? If so, there might be a case that the person is active.

[ESOP Guy]

I agree with austin they would get an allocation every year. To me the question is like he said "are they really terminated"?