Unit 7: Vesting Flashcards
Employees are always vested in their own deferral’s and rollovers? True or false
True
The law does not require all plans to defined the normal retirement age in the plan document? True or false
False the law does require the normal retirement age to be stated in the plan document
What is the maximum age that can be set for normal retirement in a plan document?
OR what in the event someone is at the stated age?
It cannot be older than age 65, OR the fifth anniversary of the employee- whichever is greater.
Immediate/full Vesting is required for what three occurrences?
1-Legal standard
2-Plan Design elements
3- Funding types (2)
Normal retirement age,
If eligibility is greater than one year- only applicable to match and NEC
QMACs & QNECs
What are the two maximum limit for vesting?
Three year cliff
Six year graded
What is the six-year graded vesting schedule also known as?
2/20 schedule
Vesting can be calculated by what two methods?
Elapsed time or counting hours
As a general rule a plan must count all years of service for vesting BUT there are 3 exceptions:
1: years worked before age 18
2: years worked prior to Establishment of plan or predecessor plan
3: exclusions because of break in service rules
What is the counting hours definition of a break in service?
Less than 500 hours worked in a 12 month period
What is the elapsed time definition of a break in service?
12 months With no work.
equals a one-year break in service
Under the elapsed time break in service rules-
What happens if an employee is rehired within 12 months from the date of termination?
What is this special rule called?
If the employee is rehired within 12 months then the employee is treated as if they were never terminated
This is called the spanking rule
What are the three rules under which a break in service can be administered?
The one year break in service rule
The rule of parity
Five year break in service rule
What is the “one-year break in service” rule? how is it administered?
If an employee incurs at least one break-in service, the plan may after rehire, disregard prior service of the employee until the employee completes another year of service
What is the rule of parity? How is it administered towards breaks in service
The plan may disregard an employees prior service if:
1) Employee was a participant at time of termination
2) The employee was 0% vested
3) Employee incurs the greater of five consecutive 1 year Brakes in service, or as many BISs As pre-break years of service.
The rule of parity is used often when administering breaks in service? True or False?
False- It is rarely applied
