vesting question

[puzzledbypensions]

Plan requires 1000 hours for vesting. Want to change effective 8/1/16 to only require 500 hours.

Would this mean that employees who have worked for 6 years but never had 1000 hours, but have had 500 each year, would now be fully vested?

Or would they still be zero, and in 2016 earn their first YOS, and be 20% vested?

Thank you!

[david rigby]

Plan requires 1000 hours for vesting. Want to change effective 8/1/16 to only require 500 hours.

Retroactively?

[My 2 cents]

I think it would be perfectly acceptable to lower the hours requirement effective only for the current year and future years. It should be OK to leave all prior years as is.

Of course, if the intention is to make it retroactive (to give the people who have been working between 500 and 1000 hours credit for those years), that would probably be OK (unlikely to disproportionately benefit highly compensated employees, unless they all work 600 hours per year).

[ESOP Guy]

I think your amendment has to answer that question and ought to do so very clearly. You can write the amendment to give back years of service or only going forward. (See My 2 Cent's comments about discrimination and so forth).

But a vague amendment is only going to be trouble. You are going to have to constantly explain why it isn't retro if it is silent to people who didn't work 1,000 hours in the past but worked 500

This is a great example of a time you really want to think about how to word an amendment to make sure you don't create any unintended consequences.

For example is the 500 hours after 8/1 or for all of 2016? (Assuming a 12/31 PYE) I would make the amendment clear on that point. I would think it is all of 2016 but state that.