Vesting related

Checking a thought/curiosity as never dealt with it before nor have any idea.

Company has an existing 401k/PS plan for many years.

They need to add a second PS plan with better allocation provisions and then merge the new plan into the existing plan.

Upon merging, will the new PS plan's benefits need to be 100% vested, assuming the new plan's vesting service will start with the inception of the plan, assuming that the new PS can even have this provision?

Thank you,

You can't get around the rules prohibiting class year vesting simply by merging the new plan into the old one and having separate vesting schedules apply if that's what you are asking.

I was not thinking of different schedules, just that service exclusion for the new plan. Maybe I am misunderstanding what you are saying.

If you maintain separate plans going forward I think you can get away with it as long as you don't have a pattern of regularly adding new plans to re start vesting schedules as that would be a pattern showing abuse.

Once you merge one plan into the other though in a single employer, you can't exclude those years anymore.

Understood and thank you for your input.

Be sure to be aware of the predecessor plan rules for counting service for vesting. Especially Treasury Regulation 1.411(a)-5(b)(3)(v)(B)(1).

”within the 5-year period immediately preceding or following the date another such plan terminates” - my understanding is that the “preceding” requirement can retroactively cause service prior to the plan effective date to be counted for vesting when such plan terminates. 

For debate only, is merging considered to be termination?

The plan lives on within the surviving plan. The company does not execute a resolution to terminate for a merger of plans.