There is a theoretical risk of contaminating cells kept in liquid nitrogen i.e. mycoplasma. However after keeping cells in the liquid phase over 30 years I have never come across a cross contamination in working practice.
It need not be immersed. The temperature of tank is more important than the level of cell. You can keep at any level as you want. Just make sure the cap of vial containing cells is tightly closed so that liquid nitrogen cannot enter the vial.
I prefer to keep cells above the liquid nitrogen level though
I have in fact had a vial explode in my face after I thawed a colleagues' cells that had been stored in the liquid phase and been closed too tight. It's not a pleasant experience. As Manish pointed out, some vials are not guaranteed for use in the liquid phase and as Murli said, cells don't need to be immersed in the liquid phase, so I recommend you keep the level of liquid nitrogen relatively low but top it up regularly.
I also experienced some explosion when I upcap the vial. To prevent the liquid splat to my face I always lower down the shield window or put on goggles. I also unsrew the vial vary slow. Really it is the temperature not whether the vials are immersed in liquid N2 or not.