Age 18 Vesting Exception

[Vlad401k]

Let's say a plan excludes all years of vesting service prior to age 18. How does that provision actually affect a participant.

Let's say someone turns 18 during the plan year. While the participant worked over 1,000 during the whole year, the participant only worked 500 hours since turning 18 (the plan required 1,000 hours to get a vesting year of service). Does the participant get full vesting credit for that year since he turned 18 during the year, or are the hours prior to his 18th birthday excluded for vesting purposes?

[jpod]

I think the regulations (under IRC Section 411) say that if you are using the computation period method you can only exclude YOS completed prior to the plan year in which the individual attains age 18, whereas if you were using elapsed time you could exclude time prior to 18th birthday. Don't hold me to this; check the regs.

[david rigby]

Reg. 1.411(a)-5 was issued prior to the age change: ERISA originally used age 22, later amended to age 18. When describing service that may be excluded, the reg reads, "...year of service completed before he attains age 22..."

I think the important word is "completed".

BTW, this was amended in REA (1984) and the age 18 applies for plan years beginning in 1985 or later.

[BG5150]

It's been a long time since I've administered a plan that was effective before 1985....