Whether Cessation of Discretionary Matching Contributions Requires 100% Vesting (Posted June 8, 1999) Technical Tip 6: The following question and answer were from the IRS Q&A Session at the 1998 ASPPA Annual Conference: If a 401(k) plan provides for discretionary matching contributions (and specifically does not allow regular profit sharing contributions) and the employer stops making matching contributions, is that a "discontinuance of contributions" such that full vesting of the existing matches is required? The same question arises if the plan provided for matches and is subsequently amended to remove that provision. It smells like a discontinuance of contributions to me, unless you meet one of the exceptions like no profits. IRS Response: Discontinuance of contributions is determined on a plan level and not on a individual contribution-type basis. As noted ..., it is a facts-and-circumstances determination. In these examples, it may be a complete discontinuance. Comment by the RLR&C ERISA Attorneys: The significance of the IRS position is that the cessation of the matching contributions could cause a partial termination and, therefore, result in 100% vesting of those contributions. View all Tips © 1999-2012 Reish Luftman Reicher & Cohen, a Professional Corporation Important notice: Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner's situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation.