We have a 401(k) plan (calendar year w/dual entry dates) that amended the plan for eligibility and vesting. The plan had required 1 year and was amended effective 01/01/09 to require 2 yrs of service for participation.

There is one employee hired 10/01/07 who satisfied the year of service requirement as of 10/01/08. Does this employee enter the plan on 01/01/09 since he had already satisfied the eligibility criteria during the 2008 plan year, or does the new 2 yr service requirement apply to him?

Put another way, which comes first, his entry or the amendment of the service requirement?

Since the plan previously had a graded vesting schedule, we obviously also amended the vesting to 100%. Does this affect anything if we look at participants' right to select which vesting schedule they want?

The participant has completed the eligibility requirements that were applicable and enters the plan on January 1, in my opinion.






Is the vesting schedule change prospective only, or was the amendment drafted so that it would apply to all benefits?

Are you saying the 401(k) portion of the plan was amended to require 2 years of service? A 401(k) arrangement cannot exceed 1 year of service.

If it is a vanilla ps plan, where such an amendment would be allowed, then North Shore Auto Body v ???? says that the person does not become a participant.

Taking into account Plan Man's comment about the 401(k) portion of the plan not being able to have 2-year eligibility, and contrary to WDIK's answer (& agreeing with Mike's conclusion), I think your individual does NOT become a particiant on 1/1/09 if the eligibility standard as of that date (1/1/09) was 2 years and this individual did not meet the 2-year requirement on that date. Remember: eligibility is not a protected benefit, and a changed eligibility standard can even remove from participation those who do not, and have not, met the new requirements. This new 2-year standard therefore will remove from the plan those who met the 1-yr. requirement but have not yet met the 2-yr. requirement--unless the plan grandfathers those who met the standards on or before 1/1/09, for example, or grandfathers all employees as of a certain date.

Be careful, however, because if this amendment removes individuals from plan participation, I believe it can result in a partial termination (I think it's called a vertical partial termination--or horizontal, I can't remember!!). Those eliminated from participation as a result of the amendment would thus become 100% vested.

I stand corrected.