QACA using 3% nonelective safe harbor, mid-year amendment to remove safe harbor

[Belgarath]

So, in this situation, where due to the QACA the 2-year vesting is being utilized, if you amend the plan mid-year to take it out of safe harbor stratus, does the 2-year vesting still apply to the safe harbor piece? It would seem reasonable top me that it would immediately become 100% vested, but I've not seen this issue. Thoughts?

[John Feldt ERPA CPC QPA]

Yes, the 2-year cliff minimum vesting still applies to the QACA safe harbor contributions that are required until the date the safe harbor ends (30-day advance notice, and an executed amendment). If plan termination or partial plan termination occurs, then 100% vesting applies. Of course the employer can apply a discretionary amendment to simply apply 100% vesting for the QACA accounts if that's what they are looking for.

[Belgarath]

Thanks John. To make sure I properly understand what you are saying, say the amendment to take it out of safe harbor status is effective August 1, 2021. Are you saying the vesting of the 3% safe harbor becomes 100% as of that date? Or are you saying that the vesting schedule CONTINUES to apply to the safe harbor contributions that were made (or required to be made) through July 31? I believe you are saying the latter.

[John Feldt ERPA CPC QPA]

The existing vesting schedule for the QACA safe harbor source continues to apply to the QACA safe harbor contributions made through July 31, even though no further QACA contributions are required for subsequent periods. That won't change unless another overriding event occurs, like a plan termination or a partial plan termination.

[Belgarath]

Gracias!