Vesting For Rehires

[mming]

A plan went through a partial plan termination where several participants had their partially-vested amounts become 100% vested. Some of these individuals have recently been rehired and the question is how to show their vesting - continue with their actual partially vested percentages using the plan's 2/20 vesting schedule, or must you maintain their vesting at 100% due to the partial termination? The doc has the standard rule of parity language regarding exclusion of certain vesting YOS for rehires but does not address this situation. Thanks in advance for all help.

[Tom Poje]

With nothing better to do, and having a handy pocket copy of the book, I just happened to be thumbing through the Code and Regulations the other day


Anyway, Code section 411(d)(3) states the following:

(3) Termination or partial termination; discontinuance of contributions
Notwithstanding the provisions of subsection (a), a trust shall not constitute a qualified trust under section 401 (a) unless the plan of which such trust is a part provides that—

(A) upon its termination or partial termination, or

(B) in the case of a plan to which section 412 does not apply, upon complete discontinuance of contributions under the plan,

the rights of all affected employees to benefits accrued to the date of such termination, partial termination, or discontinuance, to the extent funded as of such date, or the amounts credited to the employees’ accounts, are nonforfeitable.

I would read that as saying only those benefits accrued to that point in time would be 100% vested and not future ones. but that is my interpretation of the code.

I suppose if you terminated the plan and made everyone 100% vested then started a new plan you wouldn't start everyone at 100% either.

[mming]

Tom, I agree with your interpretation. Thank you for responding - that was very helpful.