Midyear vesting change adopted 12/31 and anti-cutback rules

403(b) plan sponsor wants to adopt an amendment on 12/31/18 to change vesting of employer matching contributions from immediate vesting to 3 year cliff (100% vested after 3 years) , effective 7/1/18, for all employees hired on or after 7/1/18.   

Is this a violation of the anti-cutback rules?

Yes, it would be a problem.  In theory, contributions under a 403(b) plan must be nonforfeitable. 26 C.F.R. § 1.403(b)-3(a)(2). As a practical matter, though, there is a workaround built into the regulations whereby forfeitable contributions are treated as not having been made to the 403(b) plan, but rather to a separate I.R.C. § 403(c) annuity (or a tax-exempt employee trust where a custodial account is used), when they are made. (Forfeitable contributions are required to be kept in a separate bookkeeping account than nonforfeitable contributions.) Then, as amounts become vested, and assuming all of the 403(b) plan conditions (other than nonforfeitability) are met for those contributions, those amounts are retroactively treated as having been made to the 403(b) plan for purposes of the maximum limits on contributions when they become nonforfeitable. 26 C.F.R. § 1.403(b)-3(d)(2).

But in this case, the contributions were nonforfeitable when made.  Thus, making them forfeitable again would amount to out taking money already in the 403(b), which would be impermissible.

Thank you. This was my interpretation too. I am confused as to why a fairly well known TPA has prepared an amendment for the sponsor changing vesting eff. 7/1/18.... 

Carol, would your answer be any different if the matching contributions have not yet been contributed to the plan or allocated to participant accounts?

Under the plan, matching contributions are determined on a calendar monthly basis, but may be contributed and allocated to Participants at any time within the period permitted under Treas. Reg. 1.415-6.