new vesting schedule

[Guest MNR]

Due to EGTRRA employers have a choice between a 3 yr. cliff or 6 year graded schedule. If the employer chooses to go from a 5 yr. cliff to a 6 graded schedule, employees with more than 3 years of service will need to decide wich one they want, right? Any comments will be greatly appreciated!

[Archimage]

Employers can go with whatever they want. The key thing to remember is that they cannot reduce anyone's vesting percentage. They also need to decide if they want to treat new monies with the new vesting requirements or to make it retroactive.

[Guest MNR]

thanks for your archimage. Employees still need to receive notice and a form to decide what schedule they want, don't they?

[david shipp]

Unless the new schedule is better at every point, participants with 3 YOS must be given the option of which schedule they want. I would suggest that the graded schedule be reduced to 5 years as follows - 2/20, 3/40, 4/60, 5/100. This schedule is better at every point than 5 yr cliff so no participant election is required (1.411(a)-8(B))

[Guest MNR]

Thanks David. That is a great idea! Although it will be somewhat more expensive to the employer if they want to go ahead with this schedule. don't you agree?