When is a Year of Vesting Service Credited

Do participants get a year of service when they reach 1,000 hours or at the end of the vesting computation period in which they were credited with 1,000 hours.  For example, assume a DC plan has a 5-year graded vesting schedule (20% each year), using actual hours and YOVS = 1,000 hours during calendar year.  On 12/31/2017 the employee had 4 years of vesting service.  The employee terminates on March 31, 2018 with a 1,000 hours, and takes an immediate distribution.  The Plan has the cash-out rules that provide a forfeiture upon a distribution.  I think in this example the participant would have five years of service and be 100% vested.  The participant does not have to wait until December 31, 2018 to be credited with the fifth year of service before taking a distribution in order to receive 100% vesting.  

The participant does not have to wait until 12/31/2018 to be credited with the fifth year of service.   A year of vesting service is defined (in your example) of 1000 hours.  Once the participant reaches the 1000 hours, they have a year of vesting service.

The practical side of this is when do you receive the census information to know that the participant has worked 1000 hours?  Sometimes you get it once a year at testing time.  Sometimes you receive via payroll updates.  So I will have some plans were vesting is getting updated during the year.  Some plans will get updated at the end of the year.  No big deal really.

So from your example, you would need to know at the time of distribution whether the participant has worked 1000 hours to know to update the vesting or not.

1000 hours by March 31?  She's a workhorse!

Haha, I thought the same thing!

21 minutes ago, Tom Poje said:

I assumed she was working in the pension industry and had to get the ADP tests completed - in other words, she has hours like the rest of us this time of year.

We only take on Safe Harbor business.

[Or, at least, that's what I keep telling the owners of our company we should do...]