Vesting service when predecessor plan exists

[Guest JoeActuary]

In the case of an employee who was "covered" by a predecessor plan, you must count the employee's years of service under the predecessor plan when determining vesting service in the successor plan. Would an employee have to be a participant in the predecessor plan to be "covered" or would an employee be considered "covered" if they were working for the employer and would have entered the plan as soon as they met the age and service requirements.

[Guest Jennifer Reid]

Check the plan document. It should address whether vesting service is counted from the date of hire or from the date of participation.

[QDROphile]

All service to an employer counts whether or not the employee is a position that is covered by a plan, subject to a possible exception in the event the employer has not had any plan before.

Various rules determine whether or not that service may be disregarded for various purposes.

The plan document determines who is covered and determines certain details such as whether the plan uses an employment year or a plan year for counting years of vesting service.

[david rigby]

I guess there could also be different treatment of service based on acquisition dates as well. For example, Corp. A acquires Sub. B in 1995. Sub. B does not have any qualified plan. B is not covered under the Corp.A plan until 1998. Employees with Sub. B should have all service since acquistition date recognized for vesting purposes. A could recognize service prior to 1995 but is not required to do so. And the plan amendment which recognizes B as a participating employer should state this. Did I get that right?

[QDROphile]

pax:

I agree. I think you can run into problems if you want to go many years back to credit service before the employee is in the current employer group. But that would be a very odd situation. The 401(a) (4) regulations have a lot to say about imputed service.