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May a plan select a vesting schedule that is shorter than the top-heavy six-year graded vesting schedule? Rev. 02/21/08, E-mail Alert 2008-3 Employers may choose a vesting schedule that is shorter than the top heavy vesting schedule, however, any shorter schedule must still be able to satisfy at least the minimum vesting percentage for each year of the top heavy schedule. The employer can cause trouble for him or her self with shorter vesting schedules if they are not properly structured. For example: |
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Year: |
1 | 2 | 3 | 4 | 5 | 6 |
| Top-Heavy Schedule | 0% | 20% | 40% | 60% | 80% | 100% |
Acceptable Schedule |
0% | 25% | 50% | 75% | 100% | |
| Unacceptable Schedule | 0% | 20% | 40% | 50% | 100% | |
The year 4 percentage requirement in a top-heavy plan must be at least 60% which is why the third plan – with only a 50% vesting amount in the 4th year is labeled as an Unacceptable Schedule. For more such useful information, why not sign-up for our Back-to-Basic eSeminar series. Click here for more information. |
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