Partial Plan Termination and Rehire

We have a plan that experienced a partial plan termination that resulted in some participants being made 100% vested.  The employer has since rehired one of those participants made 100% vested.  The question is does that rehire remain 100% vested in contributions going forward, even though the accrued years of service to calculate vesting does not add up to enough to be 100% vested?  I cannot find anything that specifically addresses this situation.  Comments would be most welcome.

5 hours ago, AJ North said:

We have a plan that experienced a partial plan termination that resulted in some participants being made 100% vested.  The employer has since rehired one of those participants made 100% vested.  The question is does that rehire remain 100% vested in contributions going forward, even though the accrued years of service to calculate vesting does not add up to enough to be 100% vested?  I cannot find anything that specifically addresses this situation.  Comments would be most welcome.

Without looking for citation, when there is a partial termination, your affected participant becomes 100% vested.  It never goes down from that, so if rehired, he will continue at 100%.

Thank you for responding, Larry.  That was my understanding as well and the answer I always give.  If you come across the citation, please post.  

If the employer wants a different answer, they can pay the cost of obtaining one.  I am sure that there is an attorney out there that will have a different answer.

Thanks again.

Just adding that vesting goes with the participant - not the money.  So, as Larry indicated, once the "participant" is fully vested, that applies to all current and future contributions.

Note that you might get a different answer if the EE is rehired within the controlled group but in a division covered by a different plan.

On ‎7‎/‎31‎/‎2020 at 2:20 PM, Larry Starr said:

Without looking for citation

It's 411(a)(10). The guy is fully vested under plan, so you would be amending to provide a lower vesting schedule. Can't do that.

Note added 8/3/2020: I think 411(a)(10) is the statutory support, if the answer is correct, but the conclusion is quite possibly incorrect. See Gruegen comment and my comment on Gruegen below.

FWIW...someone had recently published n a non-Benefitslink site a different opinion. 

• Regarding the question on terminated employees who are later rehired, any new employer contributions to the plan after rehire would be subject to the plan’s vesting schedule. The IRC and regulations merely require full vesting for the amount in the plan as of the date of the partial plan termination. Consequently, if a terminated employee leaves behind his or her plan balance and is later rehired, the plan would have to apply two vesting schedules.

23 hours ago, Gruegen said:

FWIW...someone had recently published n a non-Benefitslink site a different opinion. 

• Regarding the question on terminated employees who are later rehired, any new employer contributions to the plan after rehire would be subject to the plan’s vesting schedule. The IRC and regulations merely require full vesting for the amount in the plan as of the date of the partial plan termination. Consequently, if a terminated employee leaves behind his or her plan balance and is later rehired, the plan would have to apply two vesting schedules.

 

OK,  so because you took the other side, I did a little bit more research. Not exhaustive. At least as far as the language of 411(d)(3) and 1.411(d)-2 go, Gruegen, you may be right. It does say they have to be vested fully in what is there at the time of the partial termination. So quite possibly you are right. However, this may be one of those that is quite dependent on plan language, or the language of a resolution. If you are just applying plan language that is very similar to the language in Code and regs, then you probably could impose the old vesting schedule on new money. But if you have a resolution that says, "All the folks are fully vested because of the partial term," or something like that, then that probably amends their vesting schedule, which you could not take back.