Can a plan sponsor make an additional contribution to DC plan for a ce

[Guest mmagidson]

A county government formerly had a contributory DB plan and converted to a DC plan (discretionary profit sharing) about 8 years ago. Some employees did not contribute to the DB plan and, therefore, got no county contribution for those years of service. Now the county wants to make a contribution to the DC plan for those affected employees. The county will contribute a sum that would be shared by the affected employees only based on a formula that would consider pay and years of service. Can the county do this within the framework of the DC plan for the affected employees only. Any other ideas as to how to accomplish the goal of giving those employees something for the years they got no contribution in the old DB plan?"

[IRC401]

The plan will need to be amended, and there may be a significant practical problem getting the amendments made. Who has authority to amend the plan?

[Guest mmagidson]

The county government (Plan Sponsor) can amend the plan, so that is not a problem. Are there any legal problems with amending to allow an additional one-time contribution for the employees in the situation described?

[Carol V. Calhoun]

There is no problem under federal law with establishing a separate benefit for a group of employees. However, you would need to consider three things:

1. The terms of the plan document would need to provide for the benefit.

2. Any requirements of applicable state and local law would have to be considered.

3. If the employer is making contributions in one year that are attributable to many past years, you may run into problems with the maximum contribution limits of Internal Revenue Code section 415 in some instances.

Hope this helps!