Plan Amendments

[Guest JanB]

If you amend eligibility on a calendar year plan, is it effective the date the document is signed, or can it be effective the date that a corporate resolution is signed? Reason I'm asking, we are a TPA and have a investment broker that we believe back dates certain documents. Spoke with broker on June 2 about possible amendment to plan eligibility with no amendment date given and we prepared amended and restated document with July 1 amended date. Now all of the sudden a corporate resolution is showing up, dated 5/28 with a June 1 amendment date. Currently the plan has immediate eligibility with 100% vesting and no accrual requirements to receive employer contribution. The amendment made a certain class of employees (retail class) employed after June 1 have a 6 month wait and a 3-year cliff vesting schedule. Unfortunately, we do not have a relationship with the plan sponsor. What would you do if you believe a broker is back dating documents?

[My 2 cents]

Find another broker! Really, you don't want to be doing business with someone who back dates documents!

[Guest EE Bene]

With this type of amendment, you are likely going to run into the anti-cutback rule which generally says you can't take away any benefit that has already accrued. To the extent certain employees were already eligible to participate, but the back-dating makes them no longer eligible, thus taking away those benefits, it technically would not be effective.

Generally speaking however, plan amendments may be retroactive, they just can't take away benefits that already accrued (accrual should not be confused with vesting).

As to the "what to do" question, if you are a fiduciary, you have a responsibility (under the law) to say something. Realistically, this could destroy the business relationship, but it would save you the exposure of a lawsuit down the road, assuming any participants caught on and sued. You could report the Broker to the DOL, but that might only be a starting point.