vesting due to "reduction in force"

[k man]

we just took over a plan that has a clause which provides that employees who are terminated due to a "reduction in force" will be vested 100%. I have consulted with another attorney on this and he thinks it is not a great thing to have unless it is defined properly. also, use of such a clause will take the document out of prototype status. anyone have any opinions on this.

[david rigby]

Is it defined in the document?

Has it been used in the past, thus defining it in practice?

Is there collective bargaining involved?

If none of the above, you may want to remove the provision by amendment, but get legal opinion about 411(d)(6).

[k man]

it is not defined in the document. i advised them if they want to have it that we should at a mimimum define it in document when we restate the plan. that is what brings it out of prototype.

[Guest Mr. X]

Seemingly, this language is effectively the same as all plan documents, which provide for 100% vesting upon a partial termination of the plan. This definition is vague at best, but I would not consider amending each of my plans to define it specifically. I do not understand why anything more is needed in this case.

[k man]

mr. x. i think the problem here is that they are vesting people for something less then a "partial termination." for example, they are using this clause in the case of a person who is terminated due to elimination of their position. i do not think that would be a partial termination. i guess i am trying to work with the client on this but dont want some indefinite term hanging out there.

[This message has been edited by k man (edited 05-12-2000).]