Revenue Ruling 2003-65 noted that service after the freeze can be applied towards vesting requirements if accruals under the plan resume. Additionally, the IRS went on to note that if the employer establishes a new plan to be merged with the former plan, service after the frozen plan was established must be taken into account for purposes of vesting in any benefit accruals under the new plan.
>In explaining the ruling, the IRS notes that tax code Section 411(a)(4) and regulations implementing it require that all of an employee’s years of service with the employer maintaining the plan be taken into account for determining a portion of nonforfeitable benefits, other than years during which the employer did not maintain the plan (or a predecessor plan). The exception includes periods after a plan has terminated within the meaning of Section 411(d)(3)(A), according to the IRS.
>IRS ruled that since the plan in question has undergone only a partial termination, service with the employer after the plan was frozen may not be disregarded for vesting purposes.