Vesting Issue

[buckaroo]

There is some debate regarding a vesting question: 

Plan B is merging into Plan A effective 1/1/2018.  The vesting schedule for Plan A is better at every point.

The plan sponsor wants to have the old (worse) schedule apply to the old money for all merging participants.

Two questions:

1. Does the merger with different vesting schedules constitute an amendment of the vesting schedule?

2. Must the new (better) vesting schedule apply to old and new money for a participant who works an hour of service after the merger date?

[My 2 cents]

I don't work on defined contribution plans, and "old money" vs "new money" sounds like a dc plan. 

My opinion is that it is irrational to try to apply different vesting percentages to different portions of the account balances.

In my opinion, it is stingy and mean to try to avoid using the more generous Plan A vesting to all plan benefits.

If it is that important to the sponsor, let Plan A merge into Plan B, keep the higher current vested percentage for all people who were in Plan A and allow any Plan A people with 3+ years of service elect to stay on the old schedule (that rule applies to all ERISA plans, right?).  If it must be Plan B into Plan A, bite the bullet and let everyone be vested under the Plan A schedule.  It couldn't possibly add much of anything to the sponsor's costs.

[Bird]

16 hours ago, My 2 cents said:

In my opinion, it is stingy and mean to try to avoid using the more generous Plan A vesting to all plan benefits.

Amen, and thanks for putting things in common sense rather than technical terms.

I do think it is possible to merge B into and A and keep the same schedule; you "just" have to amend Plan A to say "except however...blah blah." You're not cutting anyone back by doing so.  But is it worth the trouble and ill will?  And it may not be possible in a true prototype.  Also tends to be a major hassle with recordkeeping; you have to set up a separate source or otherwise carve that out. 

[david rigby]

1.  IMHO, no.

2.  What Bird said.