Acceleration of Vesting under 457(f) Plan

[Guest gaham]

Situation of first impression for me. Employer maintains a 457(f) plan that vests on the basis of class year vesting; that is, amounts deferred in year 1 vest in year 5, amounts deferred in year 2 vest in year 6, and so on. The plan provides for a distribution while the participant is working but only for the amount of tax withholding necessary as amounts vest. Under the terms of the plan, distribution of the remaining benefit occurs in a lump sum on the Jan 1 or as soon as possible thereafter following a separation from service. Because of a change of control of a subsidiary of the employer (sale of substantially all of the assets of the sub), the employer wants to accelerate the vesting for an individual who will separate from service because of the change in control. This appears to me to be permissible under the 409A regs as long as we are not changing the payment event (separation from service). Reg. Sec. 1.409A-3(j)(1). Thus, we would accelerate the vesting for this individual because of the change of control and separation from service that occurs this year and then distribute his remaining benefit on or about Jan 1 of next year. Anyone see any problems or concerns?

[QDROphile]

I agree that vesting can be accelerated. That appears to be the only change to he plan or the individual's benefit.