Vesting using elapsed time

This question involves a 403(b) plan, but should apply equally to other DC plans. So, employer wants to change to a 18-month cliff vesting schedule.

Not sure this would necessarily work using the standard 1,000 YOS for a year of vesting. An employee could easily have 1,000 hours in less than 6 months in year 2, then terminate, so the "18 month" requirement wouldn't work.

So, what if they use elapsed time. Seems like using one of the "other" options in the adoption agreement, and using elapsed time, you could use 1.5 years (and yes, service spanning could come into play) but I think this would be allowable. Am I missing something? (And I'm not opining as to whether this is advisable or not, just if it is allowable.)

Any/all comments are welcome!

Put on the consultant's hat and ask the usual first question:  What are you trying to accomplish?

Cliff vesting at 18 months.

@david rigby 's question is most appropriate because the employer will not like the results of using the elapsed time service spanning rules.  This particularly will be the case if the employer has employees who do not work full time or are employed seasonally.

Keep in mind that the plan can have a quirky vesting provision as long as it is backed up by a vesting provision that meets the minimum requirements (1000 hours per vesting computation period (VCP) and possible use of an age 18 requirement and/or a shift in the VCP from anniversary date of hire to plan year).

Consider discussing with the employer a 3-year cliff vesting schedule based on 1000 hours, and also allowing full vesting when an employee has worked 18 months.  You could then get into the details of how to count months.  This could be:

• elapsed time from date of hire without regard to service spanning rules.
• counting months where a month is counted only if the employee worked at least 1 day/# of days/all month.
• counting days worked and dividing by 30 days to determine the number of months.

Don't get too crazy because someone has to administer this thing!

54 minutes ago, Paul I said:

Don't get too crazy because someone has to administer this thing!

Exactly!  There are likely easily administered ways to get at the ultimate goal (whatever that is): maybe 1 yr w/o regard to hours; maybe 1 yr w/ 1000 hours; maybe 18 months after DOH; maybe 15 months after DOH; maybe 12 months after DOH; etc.

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Cliff vesting at 18 months.

No disrespect intended, but there is (likely) something else behind this.   Possibly related to one particular person?  Maybe there is a different method of addressing the underlying issue?  Probe for the real reason(s).

I appreciate the comments. I fully intend to probe as to WHY this inquiry came up. David - I agree - almost certainly a reason for this sudden request. At a guess, either one or two people, or perhaps they are hiring a new class of employees, etc.  (Currently, they have 100% immediate vesting.) But this is one of those clients who is very smart, very detailed, and a "prove it to me" type - very nice, but he will absolutely insist on an answer to the original question as to if he CAN do this. Once I confirm that for him, then we can get into why he wants it, and then if he should or shouldn't have it. And no, I certainly didn't take your comment as any sign of disrespect - never would have even occurred to me. I've seen your professionalism on these boards for a long time!

Thanks.