Amending or Suspending Fixed Nonelective Profit Sharing Contributions Mid-Year

[401 Chaos]

I hope this is a relatively simple question but have seen some conflicting (or, perhaps more accurate, general) guidance on the first question so am hoping to clarify as I suspect there may be others facing the same situaiton:

1. If a non-safe harbor 401(k) / profit sharing plan document provides for "fixed" or "required" nonelective contributions but has a last day of the plan year requirement in order for a participant to accrue the benefit, can the plan be amended mid-year to either (1) change the "fixed" nonelective contribution provision to a "discretionary" contribution provision or (2) to reduce the fixed contribution rate requirement to a lower rate?  (We assume exceptions may need to be provided for any participants who retired, died, or became disabled prior to the adoption of the amendment if the plan provides for a waiver of the last day requirement in each of those situations.)
2. Assuming the answer to 1 is yes, I assume the same result if the plan had a 1,000 hour requirement rather than a last day requirement provided the amendment was adopted prior to anyone satisfying the 1,000 hour requirement? 
3. Assuming the answer to 1 is yes, I assume the same result would apply to plans with "fixed" matching contributions with a last day or other allocation requirement provided the amendment is adopted prior to a participant satisfying the allocation requirement?  (While we rarely see fixed nonelective contributions in non-safe harbor plans these days, we also rarely see fixed matching contributions with last day or similar requirements so both of these situations seem like fairly rare occurrences.)
4. General question:  why would a plan sponsor elect to include a fixed nonelective contribution if not required to do so in connection with a collective bargaining agreement or similar arrangement?  Again, we don't see these often but it's always puzzled me why someone would do this.  Maybe more as a general participant communication thing?

Thanks in advance for your assistance.

[Bird]

I'd say absolutely yes to 1, 2 and 3.  Q4 is the $1M Q.  Most likely answer is someone didn't know what they were doing.

[401 Chaos]

Thanks, Bird.  Always helpful to make sure we're not missing something when you see somewhat conflicting or qualified guidance on these issues.

[Larry Starr]

4 hours ago, Bird said:

I'd say absolutely yes to 1, 2 and 3.  Q4 is the $1M Q.  Most likely answer is someone didn't know what they were doing.

100% agreed.

[Barbara]

Actually, i have several triple stacked match plans where there is first a SH Match, then a fixed $ for $ up to 4% match, and finally a discretionary match to get the business owner up to the maximum.  Obviously this only works when none or few other employees elects to defer.  But we don't have conditions on the fixed match in this case.

[401Kerfuffle]

I would like to continue with this scenario and ask a couple of follow up questions:

1. If the plan did not have a last day or 1000-hour requirement, would you be able to change the fixed profit sharing mid-year, prospectively? Say from 7/1/2020 forward?

2. Would you answer the same way if it was a 403(b) instead of a 401(k)?

Thanks!

[403bear]

401Kerfuffle, did you get a resolution on your follow-up questions? 1.411(d)-3(a)(3)(ii) states that "Section 411(d)(6) only protects benefits that accrue before the applicable amendment date." Normally, accrued benefits in a DC plan are defined as the account balance, so this would seem to imply that changing the fixed contribution would work prospectively. However, there is that weird parenthetical of 1.411(d)-4(d)(8) that states that the following are protected benefits: “the conditions for receiving an allocation of contributions or forfeitures for a plan year after such conditions have been satisfied.” If there are no conditions, then perhaps a right has accrued to the fixed formula for the entire plan year. But I can't seem to find a definitive answer to this. The closest I have found is TAM 9735001, but that is in context of a retroactive amendment to allocation conditions, not a prospective amendment.