Can plan make vesting more liberal only for Active participants?

[ACK]

I thought this seemed pretty simple but now I am getting confused ..

401k plan currently has 6-year vesting schedule.

They would like to amend the schedule to a 5-year schedule, which will be more advantageous at every year.  They are doing this because they feel like their current schedule is not competitive in their industry.

However, they do not want to give the new vesting schedule to anyone who is terminated but still has money in the plan.

Can the amendment state that only participants who work an hour of service on or after the effective date of the amendment will be subject to the better vesting schedule?  And they want the new schedule to apply to all of the money in the accounts of anyone who is still employed on the date of the amendment (ie., they don't want to only apply the vesting schedule to new contributions made after that date).  

I guess where I am getting confused is, Is there a requirement that anyone with at least 3 years service (including terminated participants) must be allowed to elect the better schedule?

Thanks!!

 

 

[ESOP Guy]

I believe you can amended a plan to say anyone who worked at least one hours on or after 1/1/2025 will be on this vesting schedule (describe the new 5 year schedule).  

I know I have seen those types of amendments back when you were made to shorten you schedule back in the mid 2007s.   

Your criteria is non-discriminatory and treats anyone who have the same set of facts the same.  Anyone who termed before 2025 isn't have their vesting schedule changed so you don't have to offer then anything. 

[Peter Gulia]

26 C.F.R. § 1.411(a)-8 https://www.ecfr.gov/current/title-26/section-1.411(a)-8

26 C.F.R. § 1.411(a)-8T https://www.ecfr.gov/current/title-26/section-1.411(a)-8T