Safe Harbor Plans-Prior Money Vesting

[Guest Jeff P]

I am the recordkeeper for a 401k plan which adopted the safe harbor provisions for their match. Previously, they reallocated forfeitures as a non-elective contribution. Is that money now considered 100% vested along with their prior match? Or, is this an issue that the employer decides when drafting the appropriate additions to their document?

[Alf]

If the plan is carefully drafted, the actual safeharbor contributions are the only contributions that have to be immediately vested. Of course, you need to have the ability to track contributions that are subject to different vesting schedules depending on when they were contributed. The "old" (pre-safe harbor contributions are subject to the old "grandfathered" vesting schedule and only the "new" safe harbor contributions are immediately vested.