vesting schedule change

[Lou81]

hello!

I have a plan that amended the vesting schedule effective 1/1/2018 from an immediate vesting to a 2/20 vesting schedule.

I have an employee that was hired 9/2017.  She was eligible 1/1/2019 (1 year 1000 hour eligibility with 1/1 & 7/1 entry)

Does she fall under the old vesting schedule because of her hire date or does she fall under the new because of her participation date?

I appreciate your help.  Thank you!

[C. B. Zeller]

Only the benefits accrued as of the effective date of the amendment are protected from cutback. In other words participants have to be 100% vested in all their contributions up through 12/31/2017, and contributions made on or after 1/1/18 would be subject to the new schedule.

This is what is legally required, but plans can choose to be more lenient. For example in your case they might choose to let anyone who was a participant as of 12/31/17 remain under the old schedule even with respect to future contributions, so that they do not have to track vesting separately for different portions of their accounts.

A well-written amendment should be explicit about to whom the new schedule applies, and when.

My guess is that the participant in question is subject to the new vesting schedule since she had no balance on the effective date, but it will depend on exactly what the amendment says.

[Lou81]

Thank you.!

[ESOP Guy]

This is a classic example of a bad plan amendment if it doesn't answer this question in my mind.   Whoever wrote this amendment should have seen this coming and written the answer into the amendment.  To me the take away for you is this:  If they had asked you or told you about this amendment as they were drafting it you need to speak up and get things like this answered. 

The next question that is going to come up is this:  If a person was first hired and terminated during the old vesting sch and is rehired under the new one which sch do you use? 

Once again the amendment can be written to answer this.

I recently had a staffing firm amend their vesting from a 3 year cliff to a 2-20 sch.   They asked me about it.   I asked the amendment say that the new one applies to anyone whose first hire date is on or after 1/1/2020.   That amendment now answers both of those questions.   The client liked my request once we got the HR person on the phone who had to help me run the plan.   Once I pointed out if we say make rehires on the new sch we have to make sure we track them and they could have money with the old and new sch they didn't like that idea.  I would point out they have over 20k employees. 

I have seen these kinds of amendments written that say they apply to anyone who works there first hour on or after xx/xx/xxxx. 

So to me the answer is:

1)  Did you read the amendment so make sure it doesn't answer you question? 

2)  You might want to go back and see if the client and/or lawyer who wrote the amendment have any thoughts on the question.

3) See Zeller's answer.