Vesting in second plan

[Richard Anderson]

Two doctors (A & b) have separate practices, but they share employees and both are adopting employers of profit sharing plan AB. They decide to go their separate ways. Doctor A takes half of the previously shared employees with him, and Doctor B takes half of the previously shared employees with him. (None of the employees were physically cut in half) Assets are spun off from Plan AB to create Plan B, which has Doctor B's employee's assets. Plan AB now has the assets of only Doctor A's employees.

Doctor A wants to terminate Plan AB and start a new plan. For vesting purposes, he wants the new plan to exclude service before the effective date of the new plan. Everyone would start over again for vesting. Is this OK? It seems to me that it is not OK, but I'm not sure why.

[rcline46]

It is highly probable under this scenario that the second plan would be considered a successor plan, and vesting must pass back through the original plan. Also, on termination everyone in the plan would be 100% vested.

[Richard Anderson]

Thanks rcline46,

Doctor A knows that the terminated plan will be 100% vested. But, I'm trying to find any authority on whether the new plan can exclude service before the effective date of the new plan. Do you know where I can find any guidance on how successor plan rules affect vesting?