Maximum Legal Vesting Period for Part Time Employees?

[Guest Cindy00000000]

Help! I am trying to find out if there is a maximum legal vesting period for part time employees (half time or greater) who participate in a defined benefit retirement plan.

My employer is a large California utility with a 5 year Cliff vesting provision for full time employees. We are trying to get retirement benefits added for part time employees (half time or greater) and the human resource department is saying that one requirement would be prorated vesting. This could take up to 10 years for a half time employee to get any vesting. This long period seems unfair.

If there is a legal maximum maximum vesting period (or a mandated % vesting), it would GREATLY simplify our current effort!!! Thank yo for any help!

[Mike Preston]

Hi, neighbor.

Can you disclose whether the plan in question is a governmental plan? If the plan is not a governmental plan there is no way that vesting can be applied on a pro-rata basis. If the plan uses the "1,000 hour" rule, then any participant (even a part-timer) that works 1,000 hours or more in a vesting computation period (typically a one year period) will be given credit for a year of vesting service. And once they have 5 years, they are vested. If the plan uses the "elapsed time" rule, then the part-timers become vested after being employed for 5 years, even if they work less than 1/2 time.

I'm not sure about the answer if the plan is a governmental plan. I could look it up, but somebody else probably knows that answer off the top of their head.

If not a governmental plan, the person you are dealing with is not as well informed as they could be.

[mbozek]

I am assuming that the employer is a private entity since it is a utility. There is no such thing as pro rata vesting under ERISA. As Mike said the employees are vested either under 1000 hour rule for actual service performed or under the elapsed time rule for the period in which service is performed. On more thing. Under the vesting rules an employee must be credited with vesting service for all years of service after the plan is established even if the employee was not eligible to participate in the plan. Therefore part time employees will have vesting service for each prior year in which they performed 1000 or more hours of service/elapsed time and some employees may be 100% vested when they join the plan. The service will be subject to the plans break in service rules and service for years prior to a 5 year year break will not have to be credited for vesting.

Government plans are not subject to the above rules and can have any vesting schedule permitted under state law.

[david rigby]

... and there is also the possible limitation that the Plan may exclude years prior to age 18 for determination of vesting service.

In general, the 1000-hour rule is common. However, the plan could use a lower limit, but not a higher one. Although very unlikely, it is possible for the plan to define fractional years of vesting service, for example, one-half year for 750 hours, as long as the 1000-hour rule is also maintained.

The admonition to review the terms of the plan document is still valid.