Non-Bargaining to Barganing employment status change - what happens to

[Guest snorthup]

If a participant in a qualified plan changes employment status from non-bargaining to bargaining and the plan does not include bargaining employees, is this a distributable event and if not, what is the participant allowed to do with the account? Is the account frozen or will the participant still be able to make changes. If the bargaining plan has its own plan, can the participant roll the assets into the plan?

[david rigby]

Generally, if an EE changes jobs *within* the same organization, then no distribution is expected to occur because no "distributable event" has occurred. Such events usually are death, disability, retirement, or other severance of employment.

The benefit accrued (or account balance, depending on the type of plan) will remain in the plan and will be paid at some later date (death, termination, retirement, etc.). The EE may then have a benefit coming from 2 different plans; nothing wrong with that.

Unlikely that the plans would include provision to transfer assets and liabilities upon a transfer of employment, but it is possible. You also asked if the participant could "roll the assets". No, because that first requires a distribution (see first paragraph). If the plan the EE is "leaving" is a DC Plan that contains the ability to modify investment elections, then the EE should still have those same options.

[Guest GregSelf]

What about vesting? Do you continue to allow the employee to accrue vesting service for the "old" plan account (assume he was less than 100% vested on the day of the status change) even though he's no longer eligible to participate in that plan? Corbel's response to this Q was to allow him to continue to vest, then once the acct is 100% vested, transfer it to the new plan. Seems questionable.

[david rigby]

Yes, vesting service continues. But, no you do not then "transfer" the account or benefit to the second plan, unless both plans anticipate that action.

Actually, this is the perfect example of why the ERISA vesting rules were created in 1974. In fact, service both before and after the transfer will generally count towards vesting in *both* plans.