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Changing Eligibility Requirements


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I have a plan that currently has no eligibility  or age requirements.  They would like to amend the plan to require age 21, 6 months of service with 500 hours effective 2/1/2024.
By amending the eligibility criteria, would all under 21 eligible participants be grandfathered and continue being an eligible employee if they were hired before 2/1/2024? Or could they be excluded because they are not 21?
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1. you can't make it more restrictive retroactively. We are past 2/1/2024 so that ship has sailed. Pick a date in the future. And depending on the circumstances, an amendment can make someone no longer eligible, but that's a whole other conversation. 

2. to apply or not apply to existing employees depends on how the amendment and document is written. I've seen it done both ways. 

I'm a stranger on the internet. Nothing I write is tax or legal advice. 

I'd like a witty saying here, but I don't have any. When in doubt, what does the plan document say?

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As JAA notes the change must be prospective not retro active.

Eligibility is not a protected benefit so you could for example change it to 5/1/2024 (instead of 2/1/2024) and the amendment could grand father eligibility for all employees who had met the old the eligibility condition or effective with the change you could make all employees who do not meet the new eligibility but that can get a bit confusing tracking an employee who is eligible, then ineligible, then eligible again. Can be a communication hassle so unless there is a really goo reason for making these folks ineligible most Sponsors I have worked with change the eligibility prospectively and grandfather eligible for those who meet the old eligible at the time of the amendment.

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Also, be aware that a pre-approved document being used may or may not accommodate the exclusion without grandfathering, and if what the plan sponsor wants is not supported and requires modified language, that could negate reliance and require a determination letter submission.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services


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