Vesting Question

[Scott]

I'm pretty sure I know the answer to this, but would like some verification.

A company with a 401(k) plan wants to amend it to allow for a discretionary employer contribution, subject to a vesting schedule. Is there any way the vesting can be based on years of service beginning on the date of the contribution, rather than total years of service under the plan?

In other words, assume the contribution is subject to a 5-year cliff vesting schedule. Do all participants who have 5 or more years of service at the time of the contribution have to be automatically fully vested in the contribution, or can the plan provide that, for purposes of vesting in this contribution, only years of service after the date of the contribution will be counted?

[sdix401k]

I have never heard of doing it this way and I do not think you can.

Vesting can be either earned from effective date of plan, from date of hire or date of hire ( exclude years of service prior to 18)

Other wise you would have a new vesting shecdule for each year that the employer made a contribution. I dont think so.

[Tom Poje]

oooooooooooohhhhh. that sounds like 'class vesting'. That was 'banned' back in the 80's, don't exactly remember when or how that type of schedule even worked.

Maybe someone else remember that type of vesting.