Traditional safe harbor 401k restating to QACA

[30Rock]

We have a 401(k)(12) ???? harbor 401k plan with the basic match that we want to restate to a QACA safe harbor match 401(k) plan under 401(k)(13). Can the QACA match have a 2 year vesting schedule not just for new hires but also for existing participants with a traditional safe harbor match account that is 100% vested? Our document sources these accounts separately- there is a separate definition of QACA match in the document. Any thoughts would be appreciated!

[C. B. Zeller]

It should be fine - you can amend the vesting schedule with respect to benefits that accrue after the amendment date.

That said, would anyone even be affected by this? Assuming the plan requires 1 year of service for eligibility, then someone hired in 2018 would enter the plan in 2019 while the traditional SH match is in effect and be fully vested. Then in 2020 it would change to the QACA but they will already have 2 years of service, so they would be fully vested regardless. Someone hired in 2019 would enter the plan in 2020 under the QACA and be subject to the 2-year vesting from the start. Obviously the calculation changes if you use more lenient entry than 1 year of service.

[30Rock]

Yes the plan I am assuming  has less than 1 year eligibility so there will be participants with safe harbor match fully vested in 2019 and then start accruing the QACA match with the 2 year vesting in 2020. Is this ok?

[C. B. Zeller]

As long as the match that was earned under the traditional safe harbor is preserved at 100% vesting, I think it is ok.

[Bri]

I'd make sure the vesting definition spells out that the vesting for each match is considered separately, so that you're not running the risk of introducing a class vesting situation on new benefits.  The document might already inadvertently be counting all years even though the source "feels" new.

[Luke Bailey]

Of course practitioners have long taken the position that the 411(a)(10) rule requiring employees with three or more years of service to elect to be under a new vesting applies separately to separate types of contributions (e.g., matching vs. profit sharing, arguably different types of matching). However, I don't think there is any (at least formal, e.g. regulations) guidance on that point. Practitioners just did it and got favorable DLs. Unfortunately, getting a DL on this is not possible any more, so I would proceed with caution.