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She may be worried that this is considered earned income and she is limited or it reduces her SS. We know that's not the case, but she may not.

I agree with Belgarath. I would actually find it odd that the plan is drafted in a manner to actually tie your hands to a specific time frame. Generally, these types of provisions are written to provide for the maximum flexibility. Let's suppose you terminate on July 1st... Such provision would now tie your hands into processing the involuntary cashout between October 1st and December 31st. However, if you terminate a day earlier (e.g. June 30th), the written provision would 'require' you to process it within the next 3 months. Again, I agree with Begarath that "technically"..... From what I've seen in the documents that I work with, this provision provides for a little more flexibility (even fairly silent) on the timing. On another note, I tend to use it like a weapon when trying to prevent a small plan from reaching 121 participants. I even recommend clients to adopt an auto rollover for balances $5K or less when trying to keep the plan in small plan filer status. At the end of the day, it's a good idea to stay atop of this provision. Good Luck!

Ask the lawyer to send you a written signed letter, defining why the Plan terms and related regulations should be ignored. I did that once and the problem magically went away.

In the claims denial letter, reply that the plan is subject to ERISA and ERISA Section 404(a)(1)(D) provides that the plan administrator is required to operate the plan in accordance with its terms.

The problem with this suggestion is that it probably could be done, but the sponsor does not want to do it. Nothing to stop the sponsor from amending the plan to make matches 100% vested immediately. The key point is that the plan administrator gets to refuse categorically to give this employee, however disgruntled, anything to which he or she is not already entitled, even if he or she was able to find an attorney willing to threaten them. Perhaps the plan administrator should ask the attorney to provide a cite that would give the client's demands any legitimacy. Threats of litigation don't, by themselves, create a reason to give in. The suit, if filed, would have to be against the plan, not the employer (who has no liability for benefit claims against the plan, after all), and there are serious consequences if a plan needlessly gives in and pays amounts to the participant to which the participant is not entitled.