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It seems questionable to me that the following is permissible, but thought I'd solicit other opinions, as it is a sticky question. Thoughts? Thanks!

Plan is a QACA, with 1-year vesting. The plan currently utilizes the Plan Year (calendar) as the vesting computation period.

Client wants to amend the plan, for vesting purposes only, in 2022, to be elapsed time. 

At the very least, even IF it is permissible, it would require a 30 day advanced notice.

Is it permissible?  When the service crediting method is changed from Years of Service to Periods of Service, the participant receives credit for the GREATER of ..."(the Periods of Service that would be credited to the Employee under the elapsed time method for service during the entire computation period in which the transfer occurs, or the service taken into account under the Hour of Service method as of the date of the amendment.)" 

So, let's say a participant has less than 1,000 hours as of the date of the amendment - let's say May 1. Participant would receive 5 months of service as credit toward a "Period of Service." But, let's say participant terminates employment in October, with 1,000 hours or more of service. Participant would only get credit for 10 months toward a "period of service" for vesting purposes, so would NOT have a 12-month Period of Service, but would have had 1-year of service for vesting under the prior method. This would seem to violate the following requirement of IRS Notice 2016-16 for prohibited mid-year amendments. (My emphasis)

1. A mid-year change to increase the number of completed years of service required for an employee to have a nonforfeitable right to the employee’s account balance attributable to safe harbor contributions under a QACA pursuant to the safe harbor rules under § 1.401(k)-3(k)(3) or 1.401(m)-3(a)(2).

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