vesting for stand-alone plan merging into MEP

Hi.  I've got a stand-alone plan that has 6-year vesting (2/20).  They are merging into a MEP run by a payroll/benefits firm that has 100% immediate vesting.  What happens to the vesting for these people?

For new money, I presume that it follows the MEP vesting.  What about the old money?

Thanks.

 

What does the Plan document say?

And even if the multiple-employer plan’s governing documents might allow a participating employer to specify less than 100% vesting for what happened before a merger or transfer-in, how confident are you that the MEP’s administrator will capably collect and use records to apply such a vesting provision?

That wasn't particularly helpful.  Under "Special Vesting Rules", we have
 

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Vesting upon merger, consolidation or transfer. No accelerated vesting will be required solely because a Defined Contribution Plan is merged with another Defined Contribution Plan, or because assets are transferred from a Defined Contribution Plan to another Defined Contribution Plan. (See Section 14.05(a) for the benefits that must be protected as a result of a merger, consolidation or transfer.)

14.05 deals with the 'transfer of assets' (if you have an ASC document, that's what I'm reading); the relevant part is:
 

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Protected benefits. Except in the case of a Qualified Transfer (as defined in subsection (d) below), a transfer of assets is initiated at the Plan level and does not require Participant or spousal consent. If the Plan Administrator directs the Trustee to accept a transfer of assets to this Plan, the Participant on whose behalf the transfer is made retains all protected benefits (as defined in Code §411(d)(6)) that applied to such transferred assets under the transferor plan.

Subsection (d) outlines "Qualified Transfer"; the Participant getting to make their own decision regarding transferring or not seems to be an important part of this, and they are not getting that right, so it seems that this isn't applicable.

That's why I was hoping there would be some kind of rule like if the one plan itself was changing vesting - it spells out who must get the option to keep the old vesting schedule.  I'd love to take the lack of specificity to mean that we can bring over the old money and keep it according to the old plan vesting schedule... but at the same time, I wouldn't be heartbroken if something clearly said "must all follow the better vesting schedule".

4 minutes ago, Peter Gulia said:

And even if the multiple-employer plan’s governing documents might allow a participating employer to specify less than 100% vesting for what happened before a merger or transfer-in, how confident are you that the MEP’s administrator will capably collect and use records to apply such a vesting provision?

Relatively confident.  The MEP passes payroll data including hours each pay period, so the RK would track it just for this transferred source and update vesting automatically.

Would I prefer that it all have to be 100% vested?  Sure. 

10 minutes ago, AlbanyConsultant said:

That's why I was hoping there would be some kind of rule like if the one plan itself was changing vesting - it spells out who must get the option to keep the old vesting schedule.  I'd love to take the lack of specificity to mean that we can bring over the old money and keep it according to the old plan vesting schedule... but at the same time, I wouldn't be heartbroken if something clearly said "must all follow the better vesting schedule".

I don't see why this would not apply to this situation assuming the amendment/merger documents are drafted accordingly. 

What do they want to happen to the vesting of that group of people? Put that in the document. 

You should also ensure that any unallocated forfeitures from the prior plan are cleared before the merger.

All good advice.  What does the employer want?  I'd advise him to just adopt in an "interpretation" when he gets into the plan that everyone will be 100% vested per the new plan (and take care of unallocated forfeitures per Kac1214).  In my opinion vesting is overrated and forfeitures are a pain to deal with.  As an employer (old days, as I am now retired) I changed our plan to go to 100% vesting a way long time ago.  It had no impact on retention that I could tell and resolved some related issues.

I would love for them to move to full vesting, but they are holding firm on wanting to preserve the old vesting schedule if possible.  If I hadn't just taken my Ethics refresher, I might have said "Whoops, not possible, sorry; have to fully vest them!". *sad*

Math can be your friend.  Determine how much is currently non-vested.  Then do a reasonable estimate of the turnover/graded vesting over the next 3-4 years, as a means of estimating how much of the non-vested amount may be forfeited.  You may find the actual "cost" of awarding 100% vesting now isn't very significant.  The ER should also evaluate the PR value of taking credit for this (not required) action.  If you have trouble doing this calculation, there are lots of actuaries that can help you.