Top Heavy Testing

[Guest coryjat]

I am looking for someone to confirm that with the new vesting schedule maximums (3 year cliff & 2-6 graded) for all contribution types (elective and non-elective) that this effectively voided the accelerated vesting schedule for those qualified plans that are Top Heavy.

I have searched the internet and been unable to find anything speaking to this issue and as stated above, I am looking for someone to confirm that I am either understanding the PPA correctly or am I missing some piece of PPA that also spoke to a new accelerated vesting schedule for top heavy plans.

Thank you

[J Simmons]

PPA '06 requires all plans have vesting schedules as fast as what had previously been required of just top-heavy plans. Top heavy or not, a plan cannot now have cliff vesting that requires more than three vesting years, not 20% graded vesting slower than over two-six vesting years.

This is required of benefits that accrue for plan years that begin after 2006. So if a plan wants, it can retain its slower vesting for benefits that accrued in earlier years, but then that would require separate accounting.

I hope this helps.

[Guest coryjat]

PPA '06 requires all plans have vesting schedules as fast as what had previously been required of just top-heavy plans. Top heavy or not, a plan cannot now have cliff vesting that requires more than three vesting years, not 20% graded vesting slower than over two-six vesting years.

This is required of benefits that accrue for plan years that begin after 2006. So if a plan wants, it can retain its slower vesting for benefits that accrued in earlier years, but then that would require separate accounting.

I hope this helps.

So let me confirm that you would also agree that pursuant to the statement you made (which I agree with) then the only "real consequenes" of a plan going Top Heavy, for plan years after 2006, is the mandatory contribution minimums (DB:2% and DC:3%)?

Thank you

[J Simmons]

Correct