Plan Eligibility Amendment

Off PYE - 08/31- original effective date of Plan - 09/01/1995

401(k) and 3% Safe Harbor Non-elective effective on 09/01/2019

Plan Eligibility

age 19, 2 months elapsed time, 1st of month

Part -time employee hired on 01/02/2016 works 2 hours a week cleaning.  Has never deferred. On 08/31/2020 was eligible to receive a SHNE contribution.

Company wants to amend the Plan to exclude part-time from the Plan now 2 months after new Plan year.

1. My colleagues think that once an employee has met initial eligibility for the Plan and are in that you can't take a benefit away. Is this true?

2. It is too late to amend the Plan for the 2020 PYE.  Would it be acceptable to amend eligibility for the Plan for 2021 to be age 19, 1 year with 1,000 hours and dual entry? Would that PT employee still be eligible in this scenario in 2021?

Thanks

You can, generally speaking, amend a plan to exclude a class of employees prospectively, as long as it doesn't cut back any benefit they have already accrued. However there is a rule under notice 2016-16 that says you can not amend a safe harbor plan mid-year to reduce the group of employees eligible for safe harbor contributions. Therefore the earliest you could make the plan amendment effective to exclude this person would be the beginning of the next plan year.