414(h) employer amendment

[Guest Vicki Swartwood]

May an employer amend his 401(a) plan 414(h)(2) designated employee contribution from a designated $ amount to a percent of compensation?

[Carol V. Calhoun]

There is no problem under federal law with the employer doing this. However, it may raise problems under state law. For example, courts have held that Constitutional provisions preclude modification of any employee's future pension accrual rights in a way that is unfavorable to that employee. Thus, if any employee's contribution went up (without a corresponding increase in the benefit), you could have a problem.

You would also need to look at applicable state and local law to determine whether they imposed any restrictions on employee contributions, and/or on pick-ups.