Change in Match -- Any issues?

[Mr Bagwell]

Just trying to make sure we don't miss anything....

Below is the current client match scenario:

Deferral contributions are allowed first of the month following employment.

Match begins first of the month following six months of employment.

Match is 100% vested.

For anyone hired after January 1, 2017, the client would like to change to the following:

Deferral contributions are allowed first of the month following employment. (No Change)

Match begins first of the month following employment.

Match contributions become subject to 5 year graded schedule. (2-25%)

Anyone hired prior to January 1, 2017 would stay on the 6 month, 100% vested match.

I can't think of any pitfalls, but boss wants to use fine tooth comb on this one.

Thanks

[Tom Poje]

I could be wrong but....

I express a concern it may be a BRF issue. Let's suppose 2016 was the first year of the plan. the owner is the only participant, and based on the vesting schedule he is 100% vested. now he amends the plan to 2-25% for all new participants beginning in 2017. I think that fails the smell test. (or if it helps, in the old, old days you could have a 10 year cliff. that would really smell bad if the owner could be 100% vested and everyone else has to work 10 years).
I think if all future accruals (including those hired before 1/1/2017 were subject to the new vesting schedule that would be different. in addition, anyone who has 3 years of service has the right to remain on the old schedule, so really the only people a vesting change would effect would be those with less than 3 years of service. unless you have some geniuses who have been there 3 years and think a 2/25% vesting schedule is better then an immediate 100% because they think they should earn their match by giving them incentive to stay.

[Mr Bagwell]

Thanks Tom!

For the record, the plan does not have any owners in the plan. 400 to 500 employees.

The intent is NOT having all future match contributions subject to new vesting schedule.

Do you still see a BRF problem?

[Tom Poje]

well, first, I'm not even sure if it is a BRF issue, I'm only saying it could be.

the issue is not so much ownership, but HCEs, though I used that as an example. with a population the size of 400 - 500 it is probably not an issue, highly unlikely you have so many HCEs that you would fail even if you had to test

[Mr Bagwell]

Thanks again, Tom!