When are multiple vesting schedules in one plan considered discrimina

[Guest michaelv]

Company A is comprised of 3 divisions, X, Y, and Z.

Company A wants 1 401(k) plan to cover eligible employees in all 3 divisions. However, company A would like certain provisions to be different for participants in the 3 divisions. Little things, like PS contribution allocation.

I know that for the above to fly, plan will have to pass 410(B) and 401(a)(4), which will ensure (if passing) non-discrimination.

However, they also want different vesting schedules to apply to the divisions. This is a BRF issue and will also need to be non-discriminatory, but how is this actually tested?

Any help is appreciated.

[AndyH]

I think you'd test it by determining the ratio percentages of each group subject to a different vesting schedule, as if they were different plans, then determine if each ratio percentage equals or exceeds the safe harbor percentages contained in the regs, in the same way that you would test different match formulas in a 401(k) plan.

[Guest michaelv]

So in other words, you would do a 410(B) type calculation, testing as to whether a non-discriminatory number of NHCE's are covered under the more generous vesting schedule?

[AndyH]

Yes, done as if each group subject to a different vesting schedule were in it's own plan.

[Bill Berke]

I know that there is an old Rev Rul (mid-60s to late 70s or early 80s) describing how to value multiple vesting schedules. And the issue is, as you know, discrimination in favor of the HCEs. I know the iRS has explored this on more than one occassion via some form of Rev Rul, Notice or something. You may also be able to find it discussed in the IRS reviewer's handbook - on line (IRS.gov or whatever).