Vesting Scenario

[Mr Bagwell]

Can this be done?

Plan A and Plan B are not a control group, but there is common ownership.

The Employers would like the service from either plan to count for both plans.  So Bob in plan A is hired and terminated with 2 years of service.  Goes to work for Plan B, has a year of service.  So his vesting in Plan A and Plan B would be 3 years of service.  Oversimplification perhaps, but this is the scenario.

Yes? No?  Thoughts?

If yes, have would you write the language in the plans?

[Larry Starr]

20 minutes ago, Mr Bagwell said:

Can this be done?

Plan A and Plan B are not a control group, but there is common ownership.

The Employers would like the service from either plan to count for both plans.  So Bob in plan A is hired and terminated with 2 years of service.  Goes to work for Plan B, has a year of service.  So his vesting in Plan A and Plan B would be 3 years of service.  Oversimplification perhaps, but this is the scenario.

Yes? No?  Thoughts?

If yes, have would you write the language in the plans?

We do it all the time. Our documents have a provision for predecessor entity and exactly which provisions (eligibility, vesting, contributions) the credit is to be given.  Happens all the time with reorganization of medical practices.

[Mr Bagwell]

The issue that threw me off was the issue with gaining vesting in a plan that you didn't work.... you gained it in the other plan.

[QDROphile]

Credit for service for non-sponsor (or controlled group) employers, “imputed service,” is subject to rules.  They are rather liberal, but rules nonetheless.

[CuseFan]

Yes you can do this and it can work both ways, but each plan's language must provide.

By way of example, I was part of a group that was spun out of A and acquired by B. Not only did B recognize past service with A for eligibility and vesting, A recognized future service with B for vesting in A's plan, important for those not already vested at the time of transaction. The one condition was you didn't take a distribution from A's plan.

[Luke Bailey]

Mr. Bagwell, the "liberal rules" aptly noted by QDROphile for "imputed service" (which, as QDROphile also points out, is what you have) are in Treas. reg. 1.401(a)(4)-11(d)(3)(iii). I've almost never encountered a situation did not meet these requirements, but you may want to check to reassure yourself that there are, indeed, some limits..

[Mr Bagwell]

Thanks everyone.  I will check out the imputed service reg.