PLANADVISER - September/October 2022 - 12

trends
Vesting Under Scrutiny
Some employers rethink the practice in a day of 'people want it now'
administrator. " Often, sponsors go
with the QACA safe harbor specifically
because [of] two-year cliff
vesting, " he observes.
" If not forced to allow for
immediate vesting, most sponsors
choose to [adopt] a vesting
schedule, "
Droblyen
continues.
The Employee Retirement Income
Security Act does require that
plan sponsors limit cliff vesting to
three years of service, at most, to
become 100% vested, and graded
vesting to six years. " Employers
can definitely make their vesting
rules more liberal, if they choose, "
he says.
Kristi Baker, managing partner
at CSi Advisory Services, sees
a trend in sponsors shortening
their plan's vesting period. " One
issue [clients] are looking at is,
'Does a six-year vesting schedule
still make sense, for the kind of
employees we're trying to attract? "
Immediate vesting is rare, except
in safe harbor plans,
she says.
" More commonly, we see a move to
three- to four-year graded vesting. "
Vanguard's " How America
Saves 2022 " report found that, last
year, nearly half of plans immediately
vested
participants
in
employer
matching contributions,
and 25% used a five- or six-year
graded schedule. The report covers
PERSONAL-FINANCE writers around the country have taken
on the subject of vesting, some criticizing the schedules by
which employees gain ownership of employer contributions
to their defined contribution plan accounts.
Safe harbor plans must follow some clear vesting rules;
beyond that, sponsors have considerable flexibility in structuring
their plan's vesting. " My book of business is probably
skewed toward non-safe-harbor plans, " says Joe DeBello,
managing consultant at OneDigital Retirement + Wealth.
" The topic of vesting is a constant in our discussions. "
Traditional safe harbor plans require immediate 100%
vesting for participants. A qualified automatic contribution
arrangement safe harbor plan with automatic enrollment
can have up to two-year cliff vesting, says Eric Droblyen,
president and CEO of Employee Fiduciary, a third-party
4.7 million retirement accounts.
Typically, sponsors first decide about vesting via their
choice of plan design, says Jim Sampson, national practice
leader for Hilb Group Retirement Services. With non-safeharbor
plans, he says, they must determine their goal for
vesting: Is it to protect the company's money? To retain
employees? To help attract new employees? " [The latter has]
become a much larger part of the equation in the past year
or two, " Sampson says, citing the tight labor market. " We've
seen many companies go to immediate or shorter vesting. "
Sampson points especially to higher-level employees
in technical or medical fields, where " vesting is almost
a nonstarter. They're trying to pull people out of big
employers, so they try to mirror the big employers' benefits.
But in workforces such as restaurants, hospitality and
12 | planadviser.com September-October 2022
Art by Alessandra De Cristofaro
http://www.planadviser.com
PLANADVISER - September/October 2022

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