Participant Statements & PPA Vestng Requirement

[mschwechter]

Some thoughts coming to mind.

Suppose you have a case that only had deferrals and a safe harbor match (and maybe rollovers)

The fund house has the ability to reflect vesting on the quarterly PBS's (assuming you upload them from your files), but does not have the capability to hard code sources of funds as always 100% vested.

Further assume that a) you only upload vesting for participants with an account balance at 12/31/06, and:

b) You cannot upload vesting for a participant not already enrolled at the fund house.

Now, you have new participants entering the plan after 12/31/06, so their vesting is showing as 0% in the deferral and safe harbor match sources.

Since we only update vesting once a year (at the Plan Year End), have we complied with the good faith requirements or not?

I guess we can argue that the participant's vesting at the end of the prior year was 0% since they had no account balance.

What else can we do? This requirement is an unfunded mandate, and we certainly cannot afford (or are staffed) to deal with each new participant as they enter the plan.

Thoughts?

[J Simmons]

I would suggest that you supplement the quarterly PBS's with a short statement that explains that each employee is 100% vested in the benefits shown on the quarterly PBS's he or she receives from the fund house, regardless of what is indicated on the PBS's regarding vesting. There would not be an 'updating' of the vesting info required as it will always be as stated in these initial supplemental statements: 100%.

Unfunded mandates? I agree and now feel the pain of my state's governor.