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Amendment Timing


John K

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This may be an odd question, but I'm having issues with finding clear language on timing of amendments.  I typically only deal with situations where the plan is being amended starting at the beginning of the next plan year.  Are there limitations on amending the plan mid-year?  I know that there are, but my understanding is that the permissible amendments must increase benefit to participants (Ex: Introduction of mid-year safe harbor plans).  Otherwise, the change must be made prior to start of the plan year.

The sponsor would like to allow after-tax contributions and change the PS allocation from SS integration to new comparability.  I believe the after-tax could happen mid-year, but not the allocation method change.  Would anyone know where I can find more detailed language on mid-year amendments?

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And amendment can't be effective for the year if it has a prohibited cutback of benefits.

Adding after-tax is an expansion of benefits so should be fine. Though it will be subject to ACP testing, just so you are aware in case you were not.

The second part is a bit trickier if you can do it or not. If anyone is entitled to an allocation under the old formula you won't be able to change the formula until next year. However, if no one has yet earned the right to  the allocation formula then you could amend this year. generally speaking if your current plans has a last day requirement or an hours requirement that no one has yet met you could do  the amendment effective in the current year, provided it's adopted before anyone has accrued a right to the old formula.

Safe harbor 401(k) plans have a few additional levels of hoops to satisfy where you might not be able to make the change even with a last day requirement, you'd have to double check on that one if that's you situation.

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On 6/14/2024 at 2:14 PM, Lou S. said:

Adding after-tax is an expansion of benefits so should be fine. Though it will be subject to ACP testing, just so you are aware in case you were not.

I.e., if this change is being done so the owner(s) can pump in a lot of after-tax money, it likely won't work as intended.

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