Amend Plan Entry Dates

[austin3515]

Can I amend the PS source plan entry dates today if the plan has a last day rule? Plan has entry dates retro to 1/1 in year eligibility was met and we want to make it 1/1 and 7/1 following. So some people who would have been eligible will not be.

I say this is ok because they have not accrued a benefit yet due to last day rule.

[i am aware that I need to watch out for any retirees, etc, if allocation conditions are waived].

[ESOP Guy]

No, I think if someone met the conditions to enter the plan as of today you can't amend the plan to stop them from entering. They are a participant in the plan and you can't take them from them. It has been a while since I have looked this up but I believe being a participant is a protected benefit. They don't have a right to an allocation so you might be able to find a way to stop them from getting an allocation but not enter the plan. So anything you do to stop them from getting an allocation will hurt a coverage test.

The more difficult questions is if someone would meet the entry conditions on 12/29 and you amend to today.

I think you can do so as they aren't a participant. But I know some people who would want to argue the point with me.

[Bird]

I agree, you can't retroactively change eligibility to remove someone that way. They are in now but haven't satisfied conditions to share in contributions so you might be able to change the formula, but testing would probably be tricky at best.

In McGath v North Shore Auto, a plan's eligibility/entry dates were changed a couple of times, at the last minute, to exclude someone (using conditions that would not be allowable today but that's not actually relevant), but they had never entered.

[ETA Consulting LLC]

Plan participation isn't protected from cutback under Section 411(d)(6). So, you ARE allowed to amend the rules to make and individual discontinue participation in the plan. HOWEVER, you can't do it retroactively.

So, if an individual has entered the plan, effective 1/1/2014, he was a participant as of that date. I don't think there is anything that would preclude you from amending eligibility, effective today, to make it 1/1 and 7/1 following. The individual in question would've merely been a participant from 1/1/2014 - 12/16/2014.

I cannot see how this would violate any cutback rules.

Good Luck!

[austin3515]

I guess I agree with you all. How can you make something unhappen that did actually happen. He was a Participant.

[ESOP Guy]

Plan participation isn't protected from cutback under Section 411(d)(6). So, you ARE allowed to amend the rules to make and individual discontinue participation in the plan. HOWEVER, you can't do it retroactively.

So, if an individual has entered the plan, effective 1/1/2014, he was a participant as of that date. I don't think there is anything that would preclude you from amending eligibility, effective today, to make it 1/1 and 7/1 following. The individual in question would've merely been a participant from 1/1/2014 - 12/16/2014.

I cannot see how this would violate any cutback rules.

Good Luck!

I guess I have never looked at it that way. So would a person who was a participant from 1/1/2014 to 12/16/2014 be on the coverage test for 2014? They wouldn't get an allocation as of 12/31/2014 so do they hurt the test?

[ETA Consulting LLC]

Correct.

[Bird]

I agree that you can amend a plan to discontinue participation (but stand by my statement - with emphasis added - "you can't retroactively change eligibility to remove someone that way.")

I get a little - ok, totally - bogged down in the technicality of saying you retroactively amend as stated, and that that means that the person was in from 1/1 to 12/16 and then out upon signing of the amendment. I think you have, in fact, retroactively excluded him back to 1/1 or 7/1 or whatever date he entered. I think the signing date is a red herring; if the amendment says it is retroactive, then it is retroactive.

I think, at least, you'd have to clarify the amendment to say "but if someone entered prior to the signing date of this amendment and would not have entered under the terms of the plan as amended, they are excluded as of the signing date." Or something like that. Maybe counting angels on the head of a pin.

[austin3515]

Too damn complicated, I'm just waiting until 2015!