Vesting Schedules

[Guest russo40]

Per plan document the vesting schedule is figured on hire date years. If an employee is 40% vested and terminates employment 30 days prior to his anniversary date to become 60% vested does he lose this 20%. The plan document states that if a full vesting year is not accomplished you refer to the plan year which is calendar--this seems to me the employee is out of luck?? please comment

[Ervin Barham]

Please check the definition of a vesting year and related definitions carefully. Without seeing your plan document, it is impossible to accurately answer this question.

Generally a vesting year is defined as a plan year in which you have a 1000 hours or more. The vesting is not usually tied to having to be there on the last day of the plan year. If the plan document measures this on the anniversary date of the employees hire, then check the definition of vesting year.

You might also check with the document sponsor, the person who drafted the document, and the Summary Plan Description to get help with the interpretation.

[M R Bernardin]

If your plan COUNTS HOURS of service to determine years of vesting service, it cannot condition a year of vesting service on being there on the last day of the vesting computation period. Thus, if the vesting computation period is based on employment years, the employee will be 60% vested if he earned at least 1,000 hours in each of his three employment years, even if he is not there on the date of his third anniversary. Similarly, if the vesting computation period is the plan year, he will be 60% vested if he earned at least 1,000 hours in each of the three plan years, even if not there on the last day of the year. It would be unusual (to say the least) to have a provision requiring you to switch from employment year to calendar year in mid-stream; this is usually only done with reference to ELIGIBILITY computation periods or if the plan year was changed. (If your plan uses the ELAPSED TIME method, it would generally be true that the employee has to be there on the date of his third anniversary in order to get three whole years of vesting service, so if he leaves before that date -- and doesn't come back within 12 months -- he would only be 40% vested). As the prior post said, check the plan document carefully.