Mid-Year SH Change from Elapsed Time to 1000 Hours

A Safe Harbor Plan is amending eligibility from elapsed time to hours of service to trim out the part-timers.  Anyone who has already met the elapsed time requirement must be permitted to enter the plan, but anyone who has not yet met the elapsed time requirement by the time the amendment goes into effect will be required to meet the 1000 hr/12 month rule.

My understanding is that, unless the employee moves into a class of employees that is defined by the plan as excludible by definition, once you're in, you're in.  As an employee who has met eligibility requirements under prior eligibility rules, you may continue to participate in the plan, and you are therefore eligible to continue receiving the Safe Harbor contribution.  This is being questioned, and I can't find any information that confirms or denies my assumption. 

Thank you!

Ignoring additional restrictions on the timing of amendments to a safe harbor plan...

In general, it is permissible to amend a plan such that someone who is already a participant may now no longer be a participant. (As long as normal statutory eligibility requirements are not violated.)

The anti-cutback provisions of IRC 411(d)(6) only protect benefits already accrued. It does not necessarily guarantee a right to accrue future benefits. The "right" to continue to participate isn't a protected benefit, and as such, may be eliminated - again, subject to normal statutory requirements.

In my experience, such eligibility changes are almost always "grandfathered" as a matter of good employee relations, etc. - but it isn't a requirement.

Thank you!

I think the regulations relating to the transition in eligibility approaches speak to what happens to a person who has accrued service under the prior approach.  I also recall the regulations are generous in the treatment of such persons.  Be sure those regulations are understood and respected.  

While in general you can amend a plan to make someone who was eligible no longer eligible, there are special rules for mid-year amendments to safe harbor plans.  Notice 2016-16, III.D.2 says that the following type of mid-year amendment is not allowed:

Quote

2. A mid-year change to reduce the number or otherwise narrow the group of employees eligible to receive safe harbor contributions. This prohibition does not apply to an otherwise permissible change under eligibility service crediting rules or entry date rules made with respect to employees who are not already eligible (as of the date the change is either made effective or is adopted) to receive safe harbor contributions under the plan.