Rehires and vesting

I have a plan with a rehire. Previous employment was 2014-2016. At that time, the participant made deferrals and was 100% vested in profit sharing funds. In 2021, the plan changed profit sharing vesting from immediate to a 3 year cliff vesting. The participant has returned in 2022. The employer agrees that the employee is a plan participant upon rehire, but the employer is questioning the participant's vesting percentage.  

Is the participant 100% vested because that is where they were when they left OR

are they 0% vested because they had more than 5 consecutive 1-year breaks in service allowing previous vesting to be ignored (Taking all years with 1,000 hours into account when calculating the 3 years of service for the cliff vesting, they would have credit for 2015 and 2016, but still be at 0% as of 12/31/22)?

This is a classic:  What does the plan document say? 

A question like this is almost always answered by the document.   So much so the guy who trained me in this business would throw you out of his office if you asked him this question and you didn't have the document in your hand (started in this business in 1991 so it was all paper) and you couldn't show him what parts of the document you looked at.

Since he was 100% vested I think the Rule of Parity needs to be factored in and I think this person will most likely not lose any years of service for vesting. 

See this conversation.

19 hours ago, ESOP Guy said:

What does the plan document say? 

Always!

I think the prior service counts but applies to the current vesting schedule.

15 minutes ago, CuseFan said:

Always!

I think the prior service counts but applies to the current vesting schedule.

I would add a well thought out amendment to the vesting schedule would cover this fact pattern. 

In the last 5 or so years I have had two clients amend from a 3 year cliff to a 6 year graded schedule.   I asked for a change to the amendment before it was signed that makes it clear that we will look to a person original hire date to determine which schedule they will be on if they are rehired.    Both of these firms have thousands of employees and they have a lot of rehires.  It was decided it would be easiest to track if we looked to original hire date to decide which vesting schedule to use.

If the amendment is silent on the topic I would agree with Cusefan that the years of service should apply to the new vesting schedule is the most reasonable way to read things.