Jump to content

Vest Top Heavy Contribution Separately from Profit Sharing Contribution?


JWRB

Recommended Posts

I have a 401(k) plan that has a two year wait for employer profit sharing contributions, with immediate vesting for that contribution.  The profit sharing provisions predated the implementation of a 401(k) program in the plan. There is, of course, a one year wait for 401(k) deferral contributions. The plan is currently top heavy, and the top heavy vesting schedule is 2/20. 
 
The question we have boils down to the following: can a plan run two concurrent vesting schedules for different employer contributions?  The profit sharing contribution is very generous, and the plan sponsor is adamant about keeping the two year wait to receive it, and intends to maintain full and immediate vesting on that contribution.  However, the plan sponsor wants to prolong vesting of the first year TH contribution as long as possible and utilize the 2/20 vesting for that contribution.
 
Is this possible?
 

Thanks!

Link to comment
Share on other sites

My guess is that it's okay as long as you have a document that spells it out properly.  A typical prototype might say that all the non-elective contributions are subject to one vesting schedule.  And you shouldn't be able to amend later to un-vest the folks who may already have been swept in with full vesting.  But I'd think new participants could be put on a 6 year schedule going forward.

Link to comment
Share on other sites

Perhaps the plan sponsor felt that they were willing to have discretionary contributions vest quickly since they are voluntary; but since they're forced to make top heavy contributions, they want them to vest over the maximum time frame allowable.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...