Vesting Service Question

[tuni88]

When does vesting service stop in this situation? (I don't see anything in the plan document that addresses it.)

Our frozen plan's early retirement eligibility requirement is age 55 with 15 years of vesting service. We have a 47-year-old employee who had 6 years of vesting service when the plan was frozen 3 years ago so his years of vesting service now totals 9. If we never terminate the plan and he remains employed he'll have more than 15 years of vesting service when he's 55 and can retire early.

Let's say we terminate the plan at the end of this year, at which time his vesting service will be 10. Question is: Assuming continued employment past the plan termination date, does this participant continue to earn vesting service or does it stop at plan termination so that he never becomes eligible for early retirement and must wait until age 65 to draw a pension?

[K2retire]

If you terminate the plan you have to 100% vest everyone regardless of service. You would also have to pay everyone out at termination.

[My 2 cents]

Any annuities purchased for that person in connection with the plan termination would have to have, built in, the possibility of this person growing into the early retirement benefit. That is, if the plan terminates next year and buys an annuity for someone with 10 years of vesting service who continues in employment with the sponsor, if they remain in employment meeting the plan's conditions for service accruals, that annuity would have to provide that upon completing 15 years of service (including service after the termination of the plan) and attainment of age 55, whichever is later, while still employed, then the annuity would permit that person to leave employment and receive the early retirement benefit under the plan for the accrued benefit as of the freeze date.

[AndyH]

Plus, make arrangements for someone to measure future vesting service and interact with the insurer. The insurer isn't going to do evaluate future census.

Or, amend the plan to give everyone that could grow into the ER provision that entitlement as of the plan termination date.