Amending the definition of Comp for current Plan Year

A client intended for their 401(k) plan to exclude bonuses from the definition of compensation for purposes of both deferrals and matching contributions. The plan document includes bonuses. The client wants to amend the plan's definition of compensation effective 1/1/2020. It is a calendar year plan. It is not a safe harbor plan. Can the amendment be retroactive to the start of the plan year? I do not think so but the client received advice to the contrary. 

Any thoughts appreciated. Thanks. 

The amendment cannot be effective retroactively for any participants who have satisfied all of the allocation conditions under Treas. Reg. 1.411(d)-4.  Certainly for the deferrals, possible for the match, participants have already satisfied the allocation conditions.

Agreed - I don't know where the TPA is coming from in telling the client that they can amend back to 1/1, but at least they told the client to double check it!!

Also, might want to do a preliminary 414(s) test and make sure the client will actually be allowed to exclude the bonuses. Typically bonuses are paid to the HCEs more frequently and in higher amounts than to NHCEs ", but often the bonuses are in excess of the maximum compensation limit." (edited to add after comma since I forgot to include)

I've never heard a good rationale for a company to exclude bonuses and about as rarely seen them able to do so.

2 hours ago, Bill Presson said:

Also, might want to do a preliminary 414(s) test and make sure the client will actually be allowed to exclude the bonuses. Typically bonuses are paid to the HCEs more frequently and in higher amounts than to NHCEs.

I've never heard a good rationale for a company to exclude bonuses and about as rarely seen them able to do so.

Something seems backwards.

32 minutes ago, Mike Preston said:

Something seems backwards.

Well, I left off a long part of what I had in my head: ", but often the bonuses are in excess of the maximum compensation limit." (edited to add after comma since I forgot to include)

chibenefits, a percentage deferral election in 2020 before the amended is adopted should have used the plan's definition of compensation. Most likely the match should have as well, although if it is an end of year discretionary match, conditioned on end of year employment, you should be able to change retro to 1/1.