Vesting Service

[Safeharbor29]

I have a situation where a company will perform certain services for another company. The company performing the services will hire the other company's employees, but just renting their building. This is NOT an acquisition. The newly hired employees have asked to grandfather their original date of seniority as it relates to their accrued vacation. Does this create a risk where these employees could argue this should also count toward vesting in the 401k plan?

[Lou S.]

The plan document would have to grant them service with the other employer for them to get eligibility and/or vesting service.

If you are concerned however you could have a memo indicating that while we are recognizing service for seniority/vacation purposes this should not be construed as extending to other benefit plans of the company - or something like that.

[Mike Preston]

There are too many issues in this arrangement to delve deeply into them here. Both companies need to have competent labor relations and ERISA lawyers weigh in.