Participant moves from non-owner to owner late in year

[Trekker]

We have a Cash Balance Plan that has a hypothetical allocation group for shareholders and another group for non-shareholders. A non-shareholder became a shareholder in October. So he is described in one group for 9 months of the year and another group for 3 months.

The Plan does not specify at what point in the year the groups are determined.

Has anyone had this come up? How is it handled?

Thanks for any information.

[Lou S.]

Have the Plan Administrator make a decision on how it will be handled and then treat all future participants the same way.

Ideally incorporate the decision into the Plan's Administrative procedures or better yet formalize it with a Plan Amendment. (It is possible this is part of your new PPA document, I know it was added to ours).

There are a number of acceptable alternatives that include -

All participants will be treated in the class they are in on the 1st day of the plan year.

All participants will be treated in the class they are in on the last day of the plan year.

Participants will receive a "blended rate base pro-rata" on when the change occurs.

Participants will get A% on compensation earned while in group A and B% on compensation while in group B.

There may be other acceptable methods but I think the most important thing is establishing a rule an following it in a non-arbitrary manner.

[Trekker]

Thank you, Lou, for the very helpful information.

[Tom Poje]

arguably the guidelines of the enclosed LRM (page 126) should be followed.

It is page 131 of the PDF file, as highlighted

lrm.pdf