Multiple vesting schedules

[Guest mmagidson]

We are dealing with a local govt. that wants to establish a money purchase plan containing 2 vesting schedules, one for regular ee's and one for what they call "at will" ee's (4 or 5 ee's who are usually replaced when there is a change in the governing board). The regular ee's would be subject to a 5 year cliff vesting schedule and the "at will" ee's would be subject to a 3 year cliff. Has anyone had any experience with a similar situation? Are ther any legal limitations? practical/design problems?

[Carol V. Calhoun]

The only thing I'd warn you about here is that you need to look at your state's law to determine whether it permits such a vesting schedule. Because governmental plans are not subject to either the vesting rules (other than vesting on plan termination) or the nondiscrimination rules of federal law, such an arrangement would not be prohibited by federal law.

Also, do make sure that you define the affected classes of employees carefully, so that there will be no question later as to who is in which group.

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