Vesting under Merged Plan

[Just Me]

Plan A is 100% vested. Plan B has a 5 year graded schedule. Company A buys Company B. Plan B is merged into Plan A. Company B employees will be 100% vested in all new contributions made after the merger. However, Company A wants to continue vesting Company B employees in their pre-merger accounts under the old Company B schedule. Can they do this? If not why not? This does not involve cutbacks.

[david rigby]

Plan A is 100% vested.

It may help to consider that the "plan" is not vested, the participants are; then apply the vesting provisions of plan A to all participants, unless the merger amendment identifies some other vesting schedule for B participants.

[00hskrgrl]

If they did keep the two vesting schedules (which would have to be in the merger amendment like David points out), then the vesting schedules would be subject to Benefits, Rights and Features testing under Treas. Reg. 1.401(a)(4)-1(b)(3). Eight (8) pages of regulations to define how this testing is performed - a perfect waste of an afternoon.

If it wasn't in the merger amendment, then most of the Company B employees became 100% vested when the plans merged, and going back now would cause a teensy problems with anti-cutback rules.