Fixed Match-Amendment to remove

Plan has a fixed match with last day/1000 hours requirement (waived for RDD)

12/31 PYE

Effective 7/1/2020 they amend to remove the match.  Are they obligated to fund the match through 7/1. I say no since no participant (except RDD) met the last day/hours.  For the RDD, I would think if the terminated prior to 7/1 they would be owed the contribution.

What if the plan is a 6/30 PYE and they amended the plan effective 6/30 to remove the fixed match? (Plan has last day/hours requirement)  I am thinking they owe the match since it was removed on the last day.  Had they amended the plan on 6/29, I think they would not owe the match.

Thoughts?

10 hours ago, justatester said:

Effective 7/1/2020 they amend to remove the match.  Are they obligated to fund the match through 7/1. I say no since no participant (except RDD) met the last day/hours.  For the RDD, I would think if the terminated prior to 7/1 they would be owed the contribution.

I'll vote for their having to provide the match through 6/30 for those who fulfill the last day requirement. Seems like they made an offer and can't back out of it retroactively.

In terms of what is legal, I agree with the original post.  The match is a protected benefit under Code Section 411(d)(6) only for the participants who have fulfilled all of the allocation conditions.  See Treas. Reg. Section 1.4111(d)-4, Q&A-1(d)(8).

4 hours ago, MWeddell said:

In terms of what is legal, I agree with the original post.  The match is a protected benefit under Code Section 411(d)(6) only for the participants who have fulfilled all of the allocation conditions.  See Treas. Reg. Section 1.4111(d)-4, Q&A-1(d)(8).

MWeddell, it's a close question, and you may be right, but I don't think that 1.411(d)-4, Q&A-1(d)(8) settles it. There may be something more closely on point and maybe someone else will bring it up.

The reason I say that I don't think 1.411(d)-4, Q&A-1(d)(8) settles it is that you are reading it as if it said "after all such conditions have been satisfied." But it only says, "after such conditions have been satisfied," which could be read as saying that you cannot amend a plan retroactively to change any conditions for receiving an allocation after they have been satisfied. Here, the condition (deferring) is being changed (i.e., it does not result in a match) after it's been satisfied.

Luke, good counter-argument.  I don't think there is anything more on point.  I do infer the word "all" rather than "any" in that regulation but it is ambiguous.  I looked at the ERISA Outline Book and the IRS Q&As from the various years of the EA gray book and didn't find any help there.

I agree with MWeddell. I also infer "all" in such situations. For example, if you infer "any" such conditions, it renders a normal of 1,000/last day meaningless - as soon as someone attains 1,000 hours, you can no longer amend the plan to reduce/remove. This flies in the face of everything I've ever seen, been taught, or done (and back in the day, when determination letters were made all the time, the IRS had to see all the amendments and never once (with us) raised this issue on such mid-year amendments which were very common).

Is your answer the same if it just a straight Profit Sharing Plan? If not, how do you arrive at that distinction?

Anyway, FWIW, I would not hesitate to currently amend a discretionary match plan with 1,000/last day requirement to receive a match allocation, and remove the discretionary match for the entire year, if the the amendment is done prior to the last day.  

3 hours ago, Belgarath said:

Is your answer the same if it just a straight Profit Sharing Plan?

No. Answer different.

3 hours ago, Belgarath said:

If not, how do you arrive at that distinction?

They were told that if they deferred + lasted to the end of the year they would get a match. They deferred. Some will last to the end of year, I assume.

3 hours ago, Belgarath said:

Anyway, FWIW, I would not hesitate to currently amend a discretionary match plan with 1,000/last day requirement to receive a match allocation, and remove the discretionary match for the entire year, if the the amendment is done prior to the last day.  

OP says fixed match.

Hey Luke - Sorry, I meant to say fixed. I was working on a proposal and had "discretionary" on the brain.

So it seems like you are basing this more on the implied "promise" to employees that they will receive a match? What about a Money Purchase plan, which certainly has a "fixed" formula, and therefore an implied promise that you will get a contribution if you are there until the end of the year? Do you believe that the Money Purchase formula can't be amended prior to the end of the plan year if it has a last day/1,000 hour requirement (with appropriate 204(h) Notice, of course, since it is a pension plan)?

Anyway, I think we'll just agree to disagree on this one. 

9 hours ago, Belgarath said:

Hey Luke - Sorry, I meant to say fixed. I was working on a proposal and had "discretionary" on the brain.

So it seems like you are basing this more on the implied "promise" to employees that they will receive a match? What about a Money Purchase plan, which certainly has a "fixed" formula, and therefore an implied promise that you will get a contribution if you are there until the end of the year? Do you believe that the Money Purchase formula can't be amended prior to the end of the plan year if it has a last day/1,000 hour requirement (with appropriate 204(h) Notice, of course, since it is a pension plan)?

Anyway, I think we'll just agree to disagree on this one. 

Belgarath, never said I was certain. Your point is well taken regarding money purchase.