Amending Vesting service requirement from all years to participation

[AdKu]

A plan has been in existence for only one year.

Prior plan doc. calls for all years of service counted for vesting purposes as well as used elapsed time method.

We want to amend it so that for vesting purposes service crediting starts from date of participation and the service counting method will be hours of service method.

My research didn't result exact answer the things I need to be careful in doing so.

Is this permissible to start counting vesting service from the date of participation (at least for those who were hired in the amendment year)?

[rcline46]

Your plan document will actually have the rules in it for amending vesting service. Follow those rules.

[Lou S.]

There are only some exclusions you can make.

You can excluded years before the age of 18 and in a new plan you can exclude service prior to the effective date of the plan (assuming no predecessor plan).

You can not define vesting years on participation instead of service.

Rules for changing between elapsed time and hours of service vesting or vice versa are addressed in the regulations.

[AdKu]

Thank you all,

The old plan document (prepared by the prior TPA) is a Nonstandardized Prototype 401(k) & Profit Sharing Plan.

The base document has the following:

2 Rules for Crediting Vesting Service

4.2.1 Except to the extent provided in Section 4.2.2, unless otherwise elected in the Adoption Agreement, all

Years of Service are credited to determine a Participant’s Vesting Service.

4.2.2 An Employee’s Vesting Service after a Period of Severance or Break-in-Service, as applicable, of at least 5 years is not counted in computing the nonforfeitable percentage in his Employer Contribution Account

derived from contributions accrued before the Period of Severance or Break-in-Service, as applicable.

The Adoption Agreement (AA)has the following:

B. Vesting Service - option 1 in checked/selected

1. All years of service are credited to determine a Participant's Vesting Service.

The only rule in the base plan doc is as follows:

9.2 Limitations on Plan Amendment

(f) change the vesting schedule, unless each Participant having not less than 3 years of Vesting Service is permitted to elect, within a reasonable period specified by the Administrative Committee after the adoption of the amendment, to have his nonforfeitable percentage computed without regard to the amendment. However, no election need be provided to any Participant whose nonforfeitable percentage under the Plan, as amended, cannot at any time be less than the percentage determined without regard to the amendment. Any amendment of the Plan’s vesting schedule that is adopted after August 9, 2006 shall preserve the accrued benefits of any Participant or Beneficiary under the Plan in accordance with the provisions of Treasury Regulation Section 1.411(d)-3(a)(3). Notwithstanding the foregoing, an election to discontinue the Traditional Safe Harbor 401(k) Plan or Qualified Automatic Contribution Arrangement option shall not be treated as a change in vesting schedule for purposes of Code §411(a)(10).

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Our intention is to restate the plan document in its entity to Volume-submitter.

What does the regulations say to follow in a situation like this?