Relius Documents - Non-Standard Vesting

[austin3515]

Relius is telling us that if we want a vesting schedule to be 1-33, 2-67, 3-100, that we are required to specify that vesting schedule in the PPA Amendment. If we do not use the PPA amendment for this, then the 6 year graded automatically shows up in the SPD, which is in fact what happens.

Has anyone found a workaround for this? Does everyone agree that this is a "bug" as it now requires the PPA amendment to be signed, when really it should not have to be?

[rcline46]

From (a fading) memory - PPA is AFTER the EGTRRA restatement, and the PPA amendment defaults to the 6 year graded. The PPA amendment is an evergreen amendment - good until replaced. So even if you restate the document, PPA stays in effect. Therefore you need to say yes to PPA, put in the desired vesting schedule, but don't bother to reprint it, just the document and the SPD and you will be ok.

I sometimes wonder about the decisions made by the Corbel document designers.

[austin3515]

but rhen you need to have the papa signed right? Or are you saying to enter the custom schedule, print your documents and then change it back. Or does the ppa just automatically override the adoption agreement, and therefore I always need to put the custom schedules in the ppa amendment?

[austin3515]

but rhen you need to have the papa signed right? Or are you saying to enter the custom schedule, print your documents and then change it back. Or does the ppa just automatically override the adoption agreement, and therefore I always need to put the custom schedules in the ppa amendment?

[rcline46]

put the custom schedule in the document and PPA, but since PPA wants to override the doc, the SPD will be ok, and the restated doc will be ok so you don't have to resign the PPA. Won't hurt if you do, but the later date on the doc will override the PPA amendment in fact.

[Belgarath]

Interesting. A couple of observations:

The PPA/HEART amendment contains the following. I think you could argue that since your vesting schedule DOES in fact satisfy PPA, that you do NOT need to to complete a "custom" schedule in the PPA amendment. The wording in (a) says that IF your vesting schedule does NOT meet PPA.... - well clearly you do. Ambiguous enough to be reasonably interpreted to require nothing be completed on the PPA, I think, even though it might be a stretch.

Realistically, do you think that an IRS auditor, in this situation, would require you to apply 6-year graded vesting to someone who is already vested a higher percentage under the clear intent of the plan, and the SPD clearly gives the more favorable schedule? I'd like to think not. Granted it is safer to put the proper schedule in the PPA/HEART amendment.

On another note, my SPD's have been printing out showing the proper vesting schedule in such a situation - other than for 403(b)'s, which are a PIA and don't always seem to follow normal document results. I don't understand why yours aren't printing properly. Probably some arcane checklist combination - have you tried actually submitting your checklist to Relius? I had a strange situation a while back that I don't even remember, and while they couldn't figure out the problem over the phone, once I sent them the actual checklist they were able to explain how to avoid the problem.

Good luck.

The Employer only needs to complete the questions in Sections 2.2 through 2.7 below in order to override the default provisions set forth below. If the Plan will use all of the default provisions, then these questions should be skipped.

2.1 Default Provisions. Unless the Employer elects otherwise in this Article, the following defaults will apply:

a. If the Plan has a vesting schedule for nonelective contributions that does not meet the Pension Protection Act of 2006 (PPA), then the vesting schedule for any Employer nonelective contributions for Participants who complete an Hour of Service in a Plan Year beginning after December 31, 2006, will be the schedule below. Such schedule will apply to all nonelective contributions, even those made prior to January 1, 2007.

If the Plan has a graded vesting schedule (i.e., the vesting schedule includes a vested percentage that is more than 0% and less than 100%), then the vesting schedule will be a 6-year graded schedule (20% after 2 years of vesting service and an additional 20% for each year thereafter).

If the Plan has a cliff vesting schedule that requires more than 3 years of vesting service, then nonelective contributions will be nonforfeitable upon the completion of 3 years of vesting service.

[Bob R]

You are correct on the PPA amendment. The default to the 6-year graded schedule only applies if you had a graded schedule that did not meet PPA. But, for the generation of the SPD, the system doesn't know whether your graded schedule satisfies PPA (because the graded schedule was put in by using an "other" option). That's why the system automatically puts in the 6-year graded schedule into the SPD. And there is a workaround - in the PPA questions there is a question asking whether you are using the default or whether your schedule already satisfies PPA (96a). That option doesn't impact the amendment so the amendment doesn't need to be signed. Instead it allows you to override the default schedule just for the SPD.

[GMK]

austin - cudos for trying to create a reasonable SPD.

I have yet to see a computer-generated SPD that comes close to providing "accurate, but easily understandable information about the Plan."

I'm not a fan of statements like "If the Plan provides, then ..." or "If allowed by the Plan, ..." in a document that is supposed to inform participants about what is in the plan. I cringe when I see terms like "Notwithstanding the foregoing" in an SPD, like I could find a participant who knows what that means. And explaining plan benefits solely by reference to a Code section is like having speed limit signs that read, "Speed limits on this street are in accordance with local ordinance 342.551(b)." Accurate, but useless.

The worst is when the computer generates information that is flat-out wrong, like with your vesting schedule, and out in left field information about what happens if you don't make elections when you are eligible or the cash-out limits or when balances are payable and the like. (end of rant ... yes, I do feel a little better, and thanks again.)