Company currently sponsors a SH K Plan. From the beginning they have used the 3% QNEC SH election. They would like to amend their plan to include X-testing language. Upon review of the document, they have a 3 yr. vesting schl. for the non elective PS allocation. They have never allocated PS contributions. If they amend the plan to now have a 6 yr. graded vesting schedule, do the current EE's remain under the old schedule or can they apply the new 6 yr. schedule?

Thanks.

Employees who already have the 3 years of vesting service must of course remain 100% vested. Others can be moved to the 2-6 year graded vesting schedule. See Treas. Reg. 1.411(a)-8T. Of course, one should expect some employee dissatisfaction with that approach.

Of course. Just wanted to make sure under the fact that a PS allocation was never utilized that they still qualify for the 3 year.

I don't think the fact that the profit-sharing contribution was never made would affect it.

Me either