§ 410. Minimum participation standards
(a)
Participation
(1)
Minimum age and service conditions
(A)
General rule
A trust shall not constitute a qualified trust under section
401
(a) if the plan of which it is a part requires, as a condition of participation in the plan, that an employee complete a period of service with the employer or employers maintaining the plan extending beyond the later of the following dates—
(B)
Special rules for certain plans
(i)
In the case of any plan which provides that after not more than 2 years of service each participant has a right to 100 percent of his accrued benefit under the plan which is nonforfeitable (within the meaning of section
411) at the time such benefit accrues, clause (ii) of subparagraph (A) shall be applied by substituting “2 years of service” for “1 year of service”.
(ii)
In the case of any plan maintained exclusively for employees of an educational institution (as defined in section
170
(b)(1)(A)(ii) by an employer which is exempt from tax under section
501
(a) which provides that each participant having at least 1 year of service has a right to 100 percent of his accrued benefit under the plan which is nonforfeitable (within the meaning of section
411) at the time such benefit accrues, clause (i) of subparagraph (A) shall be applied by substituting “26” for “21”. This clause shall not apply to any plan to which clause (i) applies.
(3)
Definition of year of service
(A)
General rule
For purposes of this subsection, the term “year of service” means a 12-month period during which the employee has not less than 1,000 hours of service. For purposes of this paragraph, computation of any 12-month period shall be made with reference to the date on which the employee’s employment commenced, except that, under regulations prescribed by the Secretary of Labor, such computation may be made by reference to the first day of a plan year in the case of an employee who does not complete 1,000 hours of service during the 12-month period beginning on the date his employment commenced.
(B)
Seasonal industries
In the case of any seasonal industry where the customary period of employment is less than 1,000 hours during a calendar year, the term “year of service” shall be such period as may be determined under regulations prescribed by the Secretary of Labor.
(4)
Time of participation
A plan shall be treated as not meeting the requirements of paragraph (1) unless it provides that any employee who has satisfied the minimum age and service requirements specified in such paragraph, and who is otherwise entitled to participate in the plan, commences participation in the plan no later than the earlier of—
(A)
the first day of the first plan year beginning after the date on which such employee satisfied such requirements, or
unless such employee was separated from the service before the date referred to in subparagraph (A) or (B), whichever is applicable.
(5)
Breaks in service
(A)
General rule
Except as otherwise provided in subparagraphs (B), (C), and (D), all years of service with the employer or employers maintaining the plan shall be taken into account in computing the period of service for purposes of paragraph (1).
(B)
Employees under 2-year 100 percent vesting
In the case of any employee who has any 1-year break in service (as defined in section
411
(a)(6)(A)) under a plan to which the service requirements of clause (i) of paragraph (1)(B) apply, if such employee has not satisfied such requirements, service before such break shall not be required to be taken into account.
(C)
1-year break in service
In computing an employee’s period of service for purposes of paragraph (1) in the case of any participant who has any 1-year break in service (as defined in section
411
(a)(6)(A)), service before such break shall not be required to be taken into account under the plan until he has completed a year of service (as defined in paragraph (3)) after his return.
(D)
Nonvested participants
(i)
In general
For purposes of paragraph (1), in the case of a nonvested participant, years of service with the employer or employers maintaining the plan before any period of consecutive 1-year breaks in service shall not be required to be taken into account in computing the period of service if the number of consecutive 1-year breaks in service within such period equals or exceeds the greater of—
(ii)
Years of service not taken into account
If any years of service are not required to be taken into account by reason of a period of breaks in service to which clause (i) applies, such years of service shall not be taken into account in applying clause (i) to a subsequent period of breaks in service.
(E)
Special rule for maternity or paternity absences
(i)
General rule
In the case of each individual who is absent from work for any period—
(III)
by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or
(IV)
for purposes of caring for such child for a period beginning immediately following such birth or placement,
the plan shall treat as hours of service, solely for purposes of determining under this paragraph whether a 1-year break in service (as defined in section
411
(a)(6)(A)) has occurred, the hours described in clause (ii).
(ii)
Hours treated as hours of service
The hours described in this clause are—
(I)
the hours of service which otherwise would normally have been credited to such individual but for such absence, or
(II)
in any case in which the plan is unable to determine the hours described in subclause (I), 8 hours of service per day of such absence,
except that the total number of hours treated as hours of service under this clause by reason of any such pregnancy or placement shall not exceed 501 hours.
(iii)
Year to which hours are credited
The hours described in clause (ii) shall be treated as hours of service as provided in this subparagraph—
(iv)
Year defined
For purposes of this subparagraph, the term “year” means the period used in computations pursuant to paragraph (3).
(v)
Information required to be filed
A plan shall not fail to satisfy the requirements of this subparagraph solely because it provides that no credit will be given pursuant to this subparagraph unless the individual furnishes to the plan administrator such timely information as the plan may reasonably require to establish—
(b)
Minimum coverage requirements
(1)
In general
A trust shall not constitute a qualified trust under section
401
(a) unless such trust is designated by the employer as part of a plan which meets 1 of the following requirements:
(2)
Average benefit percentage test
(A)
In general
A plan shall be treated as meeting the requirements of this paragraph if—
(B)
Average benefit percentage
For purposes of this paragraph, the term “average benefit percentage” means, with respect to any group, the average of the benefit percentages calculated separately with respect to each employee in such group (whether or not a participant in any plan).
(C)
Benefit percentage
For purposes of this paragraph—
(i)
In general
The term “benefit percentage” means the employer-provided contribution or benefit of an employee under all qualified plans maintained by the employer, expressed as a percentage of such employee’s compensation (within the meaning of section
414
(s)).
(ii)
Period for computing percentage
At the election of an employer, the benefit percentage for any plan year shall be computed on the basis of contributions or benefits for—
(II)
any consecutive plan year period (not greater than 3 years) which ends with such plan year and which is specified in such election.
An election under this clause, once made, may be revoked or modified only with the consent of the Secretary.
(3)
Exclusion of certain employees
For purposes of this subsection, there shall be excluded from consideration—
(A)
employees who are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, if there is evidence that retirement benefits were the subject of good faith bargaining between such employee representatives and such employer or employers,
(B)
in the case of a trust established or maintained pursuant to an agreement which the Secretary of Labor finds to be a collective bargaining agreement between air pilots represented in accordance with title II of the Railway Labor Act and one or more employers, all employees not covered by such agreement, and
(C)
employees who are nonresident aliens and who receive no earned income (within the meaning of section
911
(d)(2)) from the employer which constitutes income from sources within the United States (within the meaning of section
861
(a)(3)).
Subparagraph (A) shall not apply with respect to coverage of employees under a plan pursuant to an agreement under such subparagraph. For purposes of subparagraph (B), management pilots who are not represented in accordance with title II of the Railway Labor Act shall be treated as covered by a collective bargaining agreement described in such subparagraph if the management pilots manage the flight operations of air pilots who are so represented and the management pilots are, pursuant to the terms of the agreement, included in the group of employees benefitting under the trust described in such subparagraph. Subparagraph (B) shall not apply in the case of a plan which provides contributions or benefits for employees whose principal duties are not customarily performed aboard an aircraft in flight (other than management pilots described in the preceding sentence).
(4)
Exclusion of employees not meeting age and service requirements
(A)
In general
If a plan—
then such employees shall be excluded from consideration for purposes of this subsection.
(B)
Requirements may be met separately with respect to excluded group
If employees not meeting the minimum age or service requirements of subsection (a)(1) (without regard to subparagraph (B) thereof) are covered under a plan of the employer which meets the requirements of paragraph (1) separately with respect to such employees, such employees may be excluded from consideration in determining whether any plan of the employer meets the requirements of paragraph (1).
(C)
Requirements not treated as being met before entry date
An employee shall not be treated as meeting the age and service requirements described in this paragraph until the first date on which, under the plan, any employee with the same age and service would be eligible to commence participation in the plan.
(5)
Line of business exception
(B)
Plan must be nondiscriminatory
Subparagraph (A) shall not apply with respect to any plan maintained by an employer unless such plan benefits such employees as qualify under a classification set up by the employer and found by the Secretary not to be discriminatory in favor of highly compensated employees.
(6)
Definitions and special rules
For purposes of this subsection—
(B)
Aggregation rules
An employer may elect to designate—
as part of 1 plan intended to qualify under section
401
(a) to determine whether the requirements of this subsection are met with respect to such trusts or annuity plans. If an employer elects to treat any trusts or annuity plans as 1 plan under this subparagraph, such trusts or annuity plans shall be treated as 1 plan for purposes of section
401
(a)(4).
(C)
Special rules for certain dispositions or acquisitions
(i)
In general
If a person becomes, or ceases to be, a member of a group described in subsection (b), (c), (m), or (o) of section
414, then the requirements of this subsection shall be treated as having been met during the transition period with respect to any plan covering employees of such person or any other member of such group if—
(D)
Special rule for certain employee stock ownership plans
A trust which is part of a tax credit employee stock ownership plan which is the only plan of an employer intended to qualify under section
401
(a) shall not be treated as not a qualified trust under section
401
(a) solely because it fails to meet the requirements of this subsection if—
(c)
Application of participation standards to certain plans
(1)
The provisions of this section (other than paragraph (2) of this subsection) shall not apply to—
(B)
a church plan (within the meaning of section
414
(e)) with respect to which the election provided by subsection (d) of this section has not been made,
(2)
A plan described in paragraph (1) shall be treated as meeting the requirements of this section for purposes of section
401
(a), except that in the case of a plan described in subparagraph (B), (C), or (D) of paragraph (1), this paragraph shall apply only if such plan meets the requirements of section
401
(a)(3) (as in effect on September 1, 1974).
(d)
Election by church to have participation, vesting, funding, etc., provisions apply
(1)
In general
If the church or convention or association of churches which maintains any church plan makes an election under this subsection (in such form and manner as the Secretary may by regulations prescribe), then the provisions of this title relating to participation, vesting, funding, etc. (as in effect from time to time) shall apply to such church plan as if such provisions did not contain an exclusion for church plans.