Amending match contribution to add last day/hours requirement

Plan sponsor currently does not impose any last day/hours of service requirement to receive a match.  Match is discretionary and is only made at the end of the plan year.

Plan sponsor wants to add a last day/hours requirement for 2019.  Can that be done effective March 1, 2019 if it only applies after March 1st?  For example plan sponsor wants to apply current rules for all contributions for January and February, but impose the last day/hours requirement for any match made anything after March 1st. 

Thanks in advance for any guidance.

There are differing opinions on exactly how it applies, but the regs say that once someone has satisfied the allocation conditions to receive a contribution for the plan year, it becomes a 411(d)(6) protected benefit.  I would have the amendment be adopted by the end of 2019 and be effective 1/1/2020.

It's buried in a list of benefits that are not 411(d)(6) protected in 1.411(d)-4 Q&A 1(d):

Quote

(8) The allocation dates for contributions, forfeitures, and earnings, the time for making contributions (but not the conditions for receiving an allocation of contributions or forfeitures for a plan year after such conditions have been satisfied), and the valuation dates for account balances;

I don't recall seeing the IRS address the issue before, I understand you could stop a match during the year so why not be able to amend the formula?

but that raises some issues as pointed out - at the start of the year you told someone there was no requirement to receive a match, and now you are changing that - which does seem to me to be protected. in this case you are changing eligibility rather than just the amount.

Let's suppose an HCE deferred the max and received the max match. now he quits after Mar 1. seems like changing the rules so terms no longer receive after that date is a bit discriminatory becausei t has no effect on him.

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and if you were able to change the amount, this probably implies some ees will receive a different rate of match than others which would require some type of BRF testing.

lets say Fred was eligible before March but after March is no longer eligible. how does coverage work? it should be representative what is taking place. so if you did quarterly testing, then the first quarter he is eligible, but the remaining quarters he isn't. and then whatever option is used for 410b is to be used for nondiscrim testing as well, so then would you run 2 ADP tests?

I've heard people claim that the allocation formula can't be amended prospectively during the year after someone satisfies the allocation conditions for the year.  If a cite is given, it's usually TAM 9735001.  That TAM deals with a plan that tried to amend after the end of the plan year to retroactively change the allocation formula.  Personally, I think it's a bit much of a leap to try to apply this TAM's conclusion to a prospective change in an allocation formula. As Tom notes, the contribution can be stopped during the year. 

However, the regs are clear that once someone has satisfied the allocation conditions for receiving a contribution for the plan year, you can't add additional allocation conditions for that year.  That's what I read the OP as saying the client wants to do. 

One of Tom's examples also points out that the timing of the amendment could be discriminatory under 1.401(a)(4)-5. 

If you really want to go outside the box, you could change the plan year-end.  That might be completely unpractical, but I think it works.  Never tried it myself, but curious if others think it is an acceptable workaround.

8 hours ago, austin3515 said:

If you really want to go outside the box, you could change the plan year-end.  That might be completely unpractical, but I think it works.  Never tried it myself, but curious if others think it is an acceptable workaround.

If the amendment is adopted by 2/28, I don't see why it wouldn't work. As you note, it may not be worth the trouble of having a short plan year.

Keep in mind that all of the sudden imposing allocation conditions would mean that they cannot make any more matching contributions throughout the Plan Year. They will have to hold off on making matching contributions until the end of the year because you don't want to take anything away from someone who now doesn't meet the conditions. i.e. they didn't work the 1,000 hours our quit before 12/31.