Vesting: Elapsed Time & Excluding Yrs of Service

[Guest Ann Hubble]

We administer a plan that uses the elapsed time method to calculate vesting service, and excludes years prior to the plan establishment (1/1/1998) for vesting. Since the elapsed time method uses the Employment Commencement Date, when does a participant first receive a year of vesting service?

i.e. Employee is hired 7/1/96. Plan effective date is 1/1/98. Does the participant have one full year of vesting service on 1/1/99, or do they need to wait until 7/1/99 before they have a year of vesting service?

[Mike Preston]

You'll have to look at the specific language in your plan. However, without seeing the language, I would think the "normal" (whatever that is!) result would be that service before 1/1/98 is not taken into account. Hence, the first "year" of vesting service under your plan is completed 12 months from 1/1/98.

In other words, in the absence of language which makes this unambigously false, I would treat everybody who was hired before 1/1/98 as having an employment commencement date of 1/1/98 for vesting purposes.

I would be very surprised if your plan was drafted and approved by the IRS in such a way as to have recognition of your hypothetical employee's first year of vesting service pushed back to 7/1/99.