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I have a new plan that has elapsed time for vesting. I just want to confirm that I am doing this correctly. The participant would have to be employed on the anniversary date to received vesting credit, correct? i.e. date of hire 4/5/2023. Terminated 12/31/2024. Therefore, he had 4/5/2023-4/5/2024 = 1 year. 4/5/2024-12/31/2024 = 0 I appreciate your help!

Per the obvious citation, when amendment of vesting schedules occurs, the emendations must allow for the apt extant participants to retain the vesting schedule as if unaffected by the amendment, at least perhaps for balances already accrued. The salient participants entail the participants who had provided suitable amounts of service, the excerpt herein lacks adjustment for subsequent amendments reducing the anticipated service favorably for the participants. URL https://www.ecfr.gov/current/title-26/part-1/section-1.411(a)-8#p-1.411(a)-8(b)(3) Citation 26 CFR 1.411(a)-8(b)(3) (b) Election of former schedule — (1) In general. Under section 411 (a)(10)(B), for plan years for which section 411 applies, if the vesting schedule of a plan is amended, the plan will not be treated as meeting the minimum vesting standards of section 411 (a)(2) unless the plan as amended, provides that each participant whose nonforfeitable percentage of his accrued benefit derived from employer contributions is determined under such schedule, and who has completed at least 5 years of service with the employer, may elect, during the election period, to have the nonforfeitable percentage of his accrued benefit derived from employer contributions determined without regard to such amendment. Notwithstanding the preceding sentence, no election need be provided for any participant whose nonforfeitable percentage under the plan, as amended, at any time cannot be less than such percentage determined without regard to such amendment. (3) Service requirement. For purposes of subparagraph (1) of this paragraph, a participant shall be considered to have completed 5 years of service if such participant has completed 5 years of service, whether or not consecutive, without regard to the exceptions of section 411(a)(4) prior to the expiration of the election period described in subparagraph (2) of this paragraph. For the meaning of the term “year of service”, see regulations prescribed by the Secretary of Labor under 29 CFR Part 2530, relating to minimum standards for employee pension benefit plans. https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-D/part-2530 Seemingly periods of service remain barred for this situation. To describe the garbled jargon, while 29 CFR Part 2530 features the term "period of service", the illocution/intent therein seems inconsistent with the use of said term to indicate the reckoning of service lacking logging of provided hours, rather as long as the employment relationship remains intact, service accrues. This situation has disadvantages to individuals who provide 1K hours to the endorsing entity during a plan year while departing prior to the conclusion of the plan year. URL https://www.ecfr.gov/current/title-26/part-1/section-1.410(a)-7#p-1.410(a)-7(a) Citation 26 CFR 1.410(a)-7(a)

From § 411(a)(8) For purposes of this section, the term "normal retirement age" means the earlier of- (A) the time a plan participant attains normal retirement age under the plan, or (B) the later of- (i) the time a plan participant attains age 65, or (ii) the 5th anniversary of the time a plan participant commenced participation in the plan. ____________________________________________________________________________________________________________________________________________________________________ The reference to the "5th anniversary" might seem ambiguous as to whether the accumulation or providing of five (5) years of vesting service/service otherwise might affect the situation. Guidance would seem to suggest the anniversary applies unaffected by the providing of a particular metric of years of service, vesting or otherwise. To consult extensive guidance on this situation: URL: https://www.ecfr.gov/current/title-26/part-1/section-1.411(a)-7#p-1.411(a)-7(b)(1)(ii) Citation: 26 CFR § 1.411(a)-7(b)(1)(ii) For purposes of paragraph (b)(1)(ii)(B) of this section, participation commences on the first day of the first year in which the participant commenced his participation in the plan, except that years which may be disregarded under section 410(a)(5)(D) may be disregarded in determining when participation commenced. https://uscode.house.gov/view.xhtml?req=(title:26 section:410 edition:prelim) OR (granuleid:USC-prelim-title26-section410)&f=treesort&edition=prelim&num=0&jumpTo=true#substructure-location_a_5_D [T]he number of consecutive 1-year breaks in service within such period equals or exceeds the greater of- (I) 5, or (II) the aggregate number of years of service before such period. (ii) Years of service not taken into account If any years of service are not required to be taken into account by reason of a period of breaks in service to which clause (i) applies, such years of service shall not be taken into account in applying clause (i) to a subsequent period of breaks in service. _______________________________________________________________________________________________________________________________________________________________________ Revenue Ruling 84-69 Internal Revenue Service 1984-1 C.B. 125 26 CFR 1.411(a)-1: Minimum vesting stand­ards; general rules. Qualification; effect of plan lan­guage on the vested accrued benefit at normal retirement age. A plan that limits an employee's right to nonforfeitable benefits to amounts in which the employee already has a nonforfeitable interest pursuant to the plan's vesting schedule does not satisfy the requirements of section 411 (a) of the Code. Rev. Rul. 84-69 ISSUE Does the retirement plan described below satisfy the minimum vesting provisions of section 411 of the Inter­nal Revenue Code? FACTS An employer maintains a noncon­tributory retirement plan which in­cludes a vesting schedule under which an employee who has at least 10 years of service has a nonforfeitable right to 100 percent of his accrued benefit. The vesting schedule satisfies the re­quirements of the section 411 (a)(2)(A) of the Code. In addition, the plan provides that an employee's right to the normal retirement benefit under the plan is nonforfeitable upon attainment of the normal retirement age (which the plan defines as age 65). Other plan language defines the term normal retirement benefit as the por­tion of the employee's accrued bene­fit determined under the plan's vest­ing schedule to be nonforfeitable. As a result, employees hired after age 55 who retire at normal retirement age are not entitled to any retirement benefit. LAW AND ANALYSIS Section 401(a)(7) of the Code pro­vides that a plan shall not be a quali­fied plan under section 401(a) unless it satisfies the requirements of section 411. Section 411(a)(2)(A), (B), and (C) of the Code provide vesting sched­ules, one of which must be satisfied in order to satisfy the requirements of section 411. In addition, the introduc­tory language of section 411(a) re­quires that an employee's right to a normal retirement benefit be nonfor­feitable upon attainment of normal retirement age. Section 411(a)(9) of the Code de­fines the term normal retirement benefit as the greater of the early re­tirement benefit or the benefit under the plan commencing at normal re­tirement age. Section 411(a)(7) of the Code de­fines accrued benefit in general as (1) in the case of a defined benefit plan, the benefit determined under the plan expressed as an annual benefit com­mencing at normal retirement age or (2) in the case of any other plan, the balance of the employee's account. For purposes of section 411 of the Code, the term normal retirement benefit means the individual's ac­crued benefit, determined without re­gard to whether such benefit is vested. Thus, for a plan to satisfy the requirements of section 411, an em­ployee participating in the plan at normal retirement age must have a nonforfeitable right to 100 percent of the employee's accrued benefit ir­respective of whether some portion of such accrued benefit would otherwise be forfeitable under the plan's vesting schedule. See Caterpillar Tractor Co. v. Commissioner , 72 T.C. 1088 (1979). HOLDING Because the plan in this case limits an employee's right to nonforfeitable benefits to amounts in which the em­ployee already has a nonforfeitable interest pursuant to the plan's vesting schedule, the plan does not satisfy the requirements of section 411 (a) of the Code. _____________________________________________________________________________________________________________________________________________________________________________________ The Tax Court has reached the same conclusion in interpreting a substantially identical counterpart provision in the Internal Revenue Code, 26 U.S.C. § 411(a) (1976). See Trustees of the Taxicab Industry Pension Fund v. Commissioner, 1981 T.C.M. (CCH) P 651; Board of Trustees of New York Hotel Trades Council & Hotel Association of New York City, Inc. Pension Fund v. Commissioner, 1981 T.C.M. (CCH) P 597; Caterpillar Tractor Co. v. Commissioner, 72 T.C. 1088 (1979) https://www.courtlistener.com/opinion/409644/clara-duchow-individually-and-as-administratrix-of-the-estate-of-herman/authorities/ https://www.upi.com/Archives/1983/05/02/The-Supreme-Court-refused-Monday-to-take-up-a/6200420696000/

Prior to USERRA, please describe the stipulations on veterans' reemployment conformity and the associated impact on vesting/benefit accrual. Please provide a diachronic survey.

Perhaps governmental plans lack the requirement to allow for five (5) consecutive periods of severance/year breaks in service to forfeit amounts where an extinguishing distribution of the accrued benefit or account balance has not occurred. Please provide helpful citations for this inquiry.

My client is a dentist and he wants to reduce vesting hours for a year of vesting credit retroactively to make a couple part time hygienists happier. He will be selling the practice soon and he wants to keep them around until then. Once he sells, he will then make everyone 100% (even terms). When I went to restate the plan to reduce vesting hours from 1000 to 500, I didn't have the option to put in a retroactive effective date. Do you think it is ok to drop hours for vesting and bump up the % for the part timers? This hasn't affected anyone who has been previously paid out in the last 6 years that I am aware of.

Employer entered into a new collective bargaining agreement a couple of years ago that provided additional non-elective contributions and full vesting under the 401(k) plan (more generous than what the plan provides). The Plan was not amended to incorporate these negotiated terms of the CBA. What is the fix? Technically, there is no plan failure. Rev. Proc. 2021-30 states that "VCP provides general procedures for correction of all Qualification Failures: Operational, Plan Document, Demographic, and Employer Eligibility." The plan has been operated in accordance with its terms, so there is no "Operational" failure, and it doesn't violate Section 401(a) by its terms, so there is no "Plan Document" failure. There is no failure to satisfy the requirements of § 401(a)(4), 401(a)(26), or 410(b) ("Demographic" failure) and the employer is eligible to establish a 401(k) plan, so there is no "Employer Eligibility" failure. Thus, I read EPCRS to say that there is no relief available for this scenario. Is that accurate??

To present a hypothetical situation, Myra R----- works at Entity W and enters retirement plan 3. She later transitions to work at Entity T, an entity within the controlled group in which Entity W occurs. Entity T has not endorsed plan 3; she attains normal retirement age while at Entity T. To prevent ambiguity, Myra R----- transitioned from Entity W prior to having attained unequivocal vesting, though with a sufficient balance to thwart § 401(a)(31)(B) distributions. Must she receive full vesting while employed at Entity T?

Company A acquired Company B and each have 401(k) plans. Plans will be merging 12/31/2020. Company A 401(k) Plan (surviving plan) has immediate vesting for all sources. Company B 401(k) Plan (merging plan) has a 6-year graded vesting schedule for match and profit sharing. 1. Can the surviving plan continue the 6-year graded vesting schedule for all of the merging match and profit sharing money (active and terminated participants)? I think this is yes but value opinions. 2. Can the surviving plan continue the 6-year graded vesting schedule for the merging terminated participant accounts while providing 100% immediate vesting for merging active participant accounts? I'm not sure on this one. 3. Can the surviving plan provide immediate 100% vesting for all of the merging match and profit sharing money (active and terminated participants)? I'm not sure why they would, but need to cover all options.

hello! I have a plan that amended the vesting schedule effective 1/1/2018 from an immediate vesting to a 2/20 vesting schedule. I have an employee that was hired 9/2017. She was eligible 1/1/2019 (1 year 1000 hour eligibility with 1/1 & 7/1 entry) Does she fall under the old vesting schedule because of her hire date or does she fall under the new because of her participation date? I appreciate your help. Thank you!

I have an issue that just arose, I was notified by my previous employer plan sponsor that I was overpaid when I left my 401k. I was overpaid roughly $6000 due to an error by the plan administrator back in 2016. I have since rolled those funds into my own personal IRA and now Vanguard is requesting I give those funds back. I dont feel that I am obligated to return those funds as I was not the one who made the mistake and in most lines of work you are held accountable for mistakes and not allowed to pass them off to someone else. Additionally I dont feel I should have to pull those funds from my IRA which would be an early distribution (additional tax consequence) and I would then need to amend my tax return from 2016 which is time and resources spent when that would not be necessary had this error not occurred. I am curious if anyone has insight into what my rights and options are? I can obviously not respond but dont want to have a law suit on my hands and dont want to have this issue come up in 20 years when they claim some crazy thing like I now owe them $50,000 because of inflation and interest.

Prior plan is an non-ERISA 403b effective from 2009 and terminated prior to 2015. They only had employee contributions, never any employer contributions. The new ERISA 403b is effective 1/1/2015. The plan excludes vesting service prior to plan's effective date. Can the new plan exclude vesting prior to 1/1/2015 even though they had another plan during that time?

We have a sponsor and additional adopting employer who are acquiring the assets and employees of numerous companies, who want to credit prior service. Is it permissible to have some sort of catchall language that credits prior service with all companies that will be purchased instead of amending the plan each time and listing out all individual companies? The ERISA books didn't seem to address the situation and the FT William document sections says list each company. Just asking because I think I've seen Relius documents in the past have such a catchall provision. Thanks in advance.

Can this be done? Plan A and Plan B are not a control group, but there is common ownership. The Employers would like the service from either plan to count for both plans. So Bob in plan A is hired and terminated with 2 years of service. Goes to work for Plan B, has a year of service. So his vesting in Plan A and Plan B would be 3 years of service. Oversimplification perhaps, but this is the scenario. Yes? No? Thoughts? If yes, have would you write the language in the plans?

I have a client that would like to change the hours required for a "year of service" for both eligibility and vesting from 1,000 hours to 750 hours. For eligibility - I believe that, as of the effective date of this change, we will need to allow all employees to enter the plan if they have worked at least 750 hours in a year, even if it was a long time ago. For vesting, do we need to adjust vesting based upon prior years of service during which an employee worked 750 hours (even if they were not in plan and/or did not work 1,000 hours)? I would think not. I would prefer that the reduction in hours for a year of vesting service is applied on a prospective basis. Thank you!

I have received a DRO for a participant who is only partially vested in a 401(k) plan. The DRO instructs that we value the vested and unvested portion of account as of a specific date in the past. And then if/as the Participant vests in the future, the AP will receive a proportionate share of that vesting. If the Participant doesn't vest, the AP doesn't receive any further funds. I am accustomed to qualifying the DRO and immediately segregating the assets, but I cannot give the AP unvested assets and then allow the AP to attain them as the Participant vests. And I cannot imagine trying to keep track and move half of the newly vested portion over each year as the Participant vests further. The risk of a recordkeeping error seems high. This feels like a problematic situation. The participant will not pay out from the vested portion and attorney indicates no other options. Would appreciate feedback as the only other DRO's I"ve dealt with were fully vested.

ERISA Section 105 requires benefit statement to include a statement of "vested percentage of such benefits (or the earliest date on which benefits will become vested)". Do you agree that the "earliest date" is the date on which a participant becomes partial vested? That is, on a 2/20 vesting schedule, does a participant "become vested" when they become 20% vested or when they become 100% vested? Thanks

A profit sharing plan currently requires 2 years of service for eligibility for an employee to become a participant. Thus, the plan has 100% immediate vesting. The plan only covers non-highly compensated employees. The plan sponsor wants to lower the eligibility to 1 year of service and introduce a 6-year graded vesting schedule. All existing Participants will remain 100% vested. How will this be handled for existing employees? Some employees have been held out already over 1 year (some almost 2 years). However, they have not yet entered the plan and thus have no rights as a participant. Must they be 100% vested when the plan is amended to lower the eligibility, or can they be placed onto the 6-year schedule? How about those with under a year, would they be treated any differently?

A participant was hired at a time when the Plan was immediate vesting. The participant was gone for 20 years and rehired after a vesting change to a 2-25. Participant left money in the plan and is the funds are 100% vested. The question and debate is whether the employee is subjected to the new schedule of 2-25, OR, because she was originally hired under the Immediate, she is subjected to the immediate schedule. We know her existing funds are 100% vested. No issue there. I lean that she is under the old Immediate schedule.... What say you?

Can an employer amend their tiered-vesting match to give immediate 100% vesting to only actively employed participants' balances? Put another way, can an employer make all match balances for only active employees 100% vested, while keeping termed participants on the existing tiered vesting schedule? Note this full vesting would be on existing balances as well as future match contributions for active employees. I'm a bit rusty on protected benefits but don't immediately see where any accrued non-forfeitable benefits are being reduced in any way. Any insights and guidance are most appreciated, as always!! Thanks!

A plan needs 11g to pass testing (401a26, 401a4, whatever). The regulation clearly states that providing additional accruals to terminated nonvested participants through 11g is not permitted. But you can do this if you vest those terminated nonvested participants as part of the 11g amendment. Is giving them 20% vesting OK? Less OK? Whatever vesting percentage is given, must it apply to the entire accrued benefit or just the additional accrual being granted under the amendment? Is there anything that specifically addresses this?

Someone is pitching to our CEO a 162 bonus with restrictive endorsement. CEO is all excited about this. But details presented by broker are somewhat lacking so I have some concerns. I understand the endorsement limits access to policy values etc. But: 1. Broker indicated that we can include a vesting schedule, and made it sound like we can still take a current tax deduction. Is that correct? With a vesting schedule, does the employee have current taxable income, or only when vested? What about payroll tax? 2. It seems clean enough if the employee stays until restrictive endorsement is lifted, but what if they don't and have to repay the company? Do we (the company) have taxable income for amount of repayment? If the employee paid tax all along, are they just SOL or can they deduct the amount repaid? If so, I assume the are out the payroll taxes, if those were paid all along? What about company - are we also out the payroll taxes? 3. This seems to be moving pretty fast in our C-Suite and I also have concerns about administration. Broker is a small 3 or 4 employee company. Our CEO is considering this plan for 100-150 employees. What kind of administrative support will we need from the broker? This seems like a long term plan and putting it in the hands of a small mom/pop company concerns me. Thank you

I am designing a new 401(k) profit sharing plan. I have a terminated participant who is young and has low compensation. They enter the plan and then terminate in the middle of the year. I want to use this participant to pass 401(a)(4) as it would be the cheapest option. I end up having to give him about 90% of his compensation. If i design the plan so that there is no hour requirement or last day requirement for discretionary profit sharing, I believe I can give him this large amount. But how should I handle vesting? Does he need to be 100% vested as I am using him so heavily to pass testing? Could he be only 20% vested? Or could I even leave him at 0% vested? How would you handle the vesting if he needed to be 100% vested, but you didnt want any other employees to be automatically 100% vested?

A client established a brand new 401(k) plan effective 1/1/2016. According to this new plan, plan document, · All service with the employer were counted for all purposes · Service crediting methods for all purposes was elapsed time method · Eligibility was 1 month and entry with 1st day of the month following or coinciding for all contributions · 2/20 vesting schedule Six month later, 7/1/2016, this client decided to change the TPA and add a New DB plan. To simplify the combo plan testing, the new TPA changed Service crediting method with ultimately affected the vesting. According to the restated 401(k) plan, plan document · Service from the effective date of the plan were counted for all purposes · Service crediting methods for all purposes become Hours of Methods · Eligibility stays the same for deferral but changed to 1 YOS with dual entry, 1st & 7th month, for Employer contribution · 2/20 vesting schedule The client financial advisor suggested it is ok to go with the restated vesting since this is the new plan. I have hard time to buy client’s financial advisor suggestion in light of IRC §411(d)(6) anti-cutback Regulations. The reason is that 90% of the employees had at least 1 year of service and entered to the plan on the effective date of the plan, 1/1/2016. I would think all full-time employees/plan participant will have at least 20% in their employer contribution by 12/31/2016. Is this not the case?

When is the following participant deemed 100% Vested: DOB 1948 (age 65 in 2013) Entry Date 1/1/2012 Resigned 2014 Plan's NRD is 1/1/2017 "Normal Retirement Age" as elected in the Plan's Corbel Adoption Agreement is the later of the Participants 65th Birthday or the 5th Anniversary of the first day of the Plan Year in which participation began 1.52 "Normal Retirement Age" means the age elected in the Adoption Agreement at which time a Participant's Account shall be nonforfeitable (if the Participant is employed by the Employer on or after that date). Given the above, is this participant 100% vested in 2013, at his/her 65th bday, or as of 1/1/2017? Thank you.