Company didn't follow its plan

.

First, what does "two vesting elections" really mean?  Is it just a choice between cliff vesting or graded vesting, or is there something about the election that is tied to the distribution? 

When you ask whether the company can make the decision, the usual response will be, "What does the plan say?"  There's nothing wrong with a plan permitting the company to make elections, but if the provision requires the participant to make the decision, that the plan is not being operated in compliance with its written terms which is always problematic.  A retroactive amendment would not generally save a plan sponsor if a participant can show harm.

Perhaps this really involves the ability of a sponsor to accelerate vesting.  This acceleration can take place even if it is right before a distribution which means that a participant can receive something or more than he/she would have received otherwise.  There would be and be no participant election to such acceleration under 409A.  The same is true of the right of a sponsor to accelerate distribution of a "small amount" (an amount less than the 402(g)(1)(B) amount- $18,000 this year).  These two things sometimes get confused.  But in either case, the participant cannot make the decision, and the sponsor should probably treat all participants equitably when doing so to avoid issues later (like accelerate vesting for some executive - CEO- and not others). Otherwise, like XTitan says, what does the doc say???

Agree with prior commenters. Need more facts, especially what plan says. If there are vesting choices, presumably one is not always better depending on how long employee stays (e.g., do you want to elect 2-year cliff or 3-year? would not be much of a choice). If the plan doc says participant has choice and employer doesn't actually give the participant a choice and the participant is later harmed because other schedule would have been better, then the participant could bring an action under ERISA to enforce plan document. Since ERISA says very little about top-hat plans (assuming this is a good top-hat), the outcome of such an action is always uncertain and dependent on facts and circumstances.

If the employer is consistently making the same choices in given sets of circumstances, just remove the choice and hard wire it into the plan document.