10 Employees transfer employment from Company A to Company B.
Company A and B have 401 (k) Plans with employer match. The same
desk rule applies, and trustees agree to transfer the account
balances to Company B's plan.

The vesting schedules of the employer match is different in each
plan. Company A's plan provides full and immediate vesting.
Company B has a 5 year cliff schedule.

Since the new contributions now made for these 10 employees are
subject to a longer vesting schedule (assume each employee has less
than 5 years of service and past service is credited), has a deemed
amendment of the vesting schedule occurred? In other words, are
the 10 participants entitled to make an election pursuant to
1.411(a)-8 and vest under the old or new schedule, if they have at
least 3 years or service? I understand that the transferred
account balances are not affected, and remain 100% vested.

Thanks to all that answer.

My understanding is that the change in vesting rule applies to a single plan. Here you state that there are two plan, so it would not apply. Your case seems similar to a single employer which has two plans with different vesting schedules.

I'm dealing with a similar issue but in this case Plan A and Plan B or being merged. Do the participants in Plan A (with the shorter vesting schedule) get to make an election to use their shorter vesting schedule with respect to new accruals? Does it matter that Plan A is frozen in September and then merged in December. In other words, if you say the merger is in effect an amendment to the vesting schedule, then are you comfortable with the idea that different vesting schedules can be used if the plans are kept apart.

Anybody dealt with this issue?

Kurt