Hours for Vesting

[Guest Jen Willard]

We currently administer a 401K plan for company A. Company A bought Company B, who also has a 401K plan. Company B's plan assets are being transferred to Company A's plan. In order to receive vesting for this year, a participant must work 1000 hours.

I have a terminated employee that worked more than 1000 hours with Company B, but less than 500 hours with Company A. I will also need to know if I need both Company's hours for the year end census.

My question is......

Do we use hours from Company B in addition to hours from Company A in order to determine if a participant worked 1000 hours for this year?

[mbozek]

You need to talk to counsel for the buyer to find out how the purchase agreement treated service with the predecessor employer for vesting ,eligibility, etc. These terms are negotiated between the buyer and seller.

[david rigby]

You may also need to pay attention to when the purchase occurred, not just the plan merger.

On second thought, you did not state "merger", but I assume that's what the "transfer" is. If not, please provide some description.

[E as in ERISA]

You need to understand the form of the company transaction and plan transaction, and what the documents say.

[Kirk Maldonado]

My recollection is that, if the documents are silent, you are not required to take into account service with predecessor employers. Thus, service with Company B need not be taken into account under Company A's plan.

[E as in ERISA]

I thought that in a stock sale, service is generally counted. In an asset sale, service is only counted if the successor employer maintains the plan.

[four01kman]

It seems to me the employee left Company B before the transaction. Therefore, the vesting would be based on the terms of Company B's plan at that time.

[E as in ERISA]

It's not clear, but I thought he worked for Company A ("less than 500 hours") and terminated there.

[austin3515]

Actually my recollection is that if all of the account balances for all of the transferred participants are transferred to the new plan, that the new plan is treated as the continuation of the old plan, and therefore, all eligibility/vesting should be creditted as if one company. Just a guess though.

This merger/acquisition stuff definitely needs to be addressed by the Plan's legal counsel - the stakes are high!