Vesting Discrimination Requirements

[Guest Wobble14]

Hello all. I had a quick question for you employee-benefits whizzes. I was wondering whether you could waive the vesting schedule for a highly compensated employee in a 401(k) plan. For example, in trying to lure an executive to our company, would it bust out 401(k) plan if we allowed him to immediately vest all employer contributions made to him on behalf of his plan. Therefore, he would get immediate employer vesting while other employees, including other highly compensated employees (HCEs) still had to wait out the vesting schedule. I assume such a situation would take us out of the safe harbor rules, and then subject us to year to year testing based upon our ADPs and other such tests. Is that correct? Is there any authority for allowing a one-time waiver to an employee that would allow us to qualify in the safe harbor? Thank you all!

[Tom Poje]

If it smells funny you know you probably can't do it. (Poj Interpretative Thought of the situation)

The regs word it this way

A plan satisfies this paragraph © if the manner in which employees vest in their accrued benefits under the plan does not discriminate in favor of the HCEs. Treas Reg 1.401(a)(4)-11©

It does not matter if only one HCE vests at 100% immediately.

You have zero, zippo, none, etc NHCEs with this advantage. you fail BRF (Benefits Rights Features). do not pass go Do not collect 200.

Hey, welcome aboard!