Amendment to Vesting Schedule

[emmetttrudy]

A cash balance plan is newly effective 1/1/2009. The vesting service is credited from the plan's effective date forward, and the vesting schedule is 3-year cliff.

The plan sponsor wants to amend the vesting schedule for 2010 to include all years of employment. The question is, does this affect the participants that terminated non-vested in 2009? Would they have to go back and pay those participants their vested accrued benefit assuming they had 3 or more years of total service? Or would it only affect the participants in 2010 and going forward?

[SoCalActuary]

The amendment is effective in 2010. If the sponsor wants to make it retroactive, they can choose to do so. But it is not required.

[AndyH]

Unless the amendment runs afoul of the nondiscrimination requirement of 1.401(a)(4)-5 that the timing of a plan amendment not discriminate significantly in favor of HCEs or former HCEs, which is a facts and circumstances determination.

The psychic friends network senses some uncertainty about the intent.

[Earl]

Is a new cash bal plan allowed to exclude service before the effective date for vesting?

I find articles (tax facts) saying no but they seem to come to a conclusion based upon the regs, not a specific reg statement that I can find.

Thank you