May vesting service (with 1,000 hours) be granted on the date of termi

[John A]

May a plan document that requires 1,000 hours for vesting service provide that an active employee will be credited with a year of vesting service as of the end of the vesting computation period while a terminated employee will be credited with a year of vesting service as of the employment termination date (in each case provide 1,000 hours of service were credited during the eligibility computation period)?

For example, an employee is hired January 1, 2000 in a plan with a calendar year plan year. A year of vesting service is defined as 1,000 hours in the vesting computation period. The plan has a 3-year cliff vesting schedule.

The employee worked 1,000 hours in 2000 and 2001. The employee has worked 1,000 hours from January 1, 2002 to May 31, 2002 and would like to take a loan of 50% of the vested balance of their account.

Can a plan provide that this employee is 0% vested (and thus not eligible for a loan) until December 31, 2002, provided the plan also says that the employee will get credit for the 2002 year of vesting service (and so be 100% vested) if the employee terminates employment on or after May 31, 2002?

The closest previous thread I found to this question is below, but it is not exactly the same question.

http://benefitslink.com/boards/index.php?showtopic=8608

[Guest asire2002]

Although a plan may, for administrative reasons, wait until the end of the plan year to update its records to reflect vesting changes, participants earn vesting service as soon as they complete 1,000 hours during the vesting computation period. So, I would say no, you cannot make the active employee wait until the end of the year to recognize his/her vesting.

[E as in ERISA]

The statute requires the plan to give credit to the employee for vesting service for 2002 (and so be 100% vested) even if employee terminates employment on or after May 31, 2002.

But the loan rules are permissive and a plan can impose more stringent limitations than the statute. Is there a reason why the plan couldn't provide that loans can only be taken by those who were vested as of the beginning of the year...provided that wasn't discriminatory in effect?