§ 1053. Minimum vesting standards
(a)
Nonforfeitability requirements
Each pension plan shall provide that an employee’s right to his normal retirement benefit is nonforfeitable upon the attainment of normal retirement age and in addition shall satisfy the requirements of paragraphs (1) and (2) of this subsection.
(1)
A plan satisfies the requirements of this paragraph if an employee’s rights in his accrued benefit derived from his own contributions are nonforfeitable.
(2)
(A)
(i)
In the case of a defined benefit plan, a plan satisfies the requirements of this paragraph if it satisfies the requirements of clause (ii) or (iii).
(ii)
A plan satisfies the requirements of this clause if an employee who has completed at least 5 years of service has a nonforfeitable right to 100 percent of the employee’s accrued benefit derived from employer contributions.
(iii)
A plan satisfies the requirements of this clause if an employee has a nonforfeitable right to a percentage of the employee’s accrued benefit derived from employer contributions determined under the following table:
The nonforfeitable
Years of service:
percentage is:
3
20
4
40
5
60
6
80
7 or more
100.
(B)
(i)
In the case of an individual account plan, a plan satisfies the requirements of this paragraph if it satisfies the requirements of clause (ii) or (iii).
(ii)
A plan satisfies the requirements of this clause if an employee who has completed at least 3 years of service has a nonforfeitable right to 100 percent of the employee’s accrued benefit derived from employer contributions.
(iii)
A plan satisfies the requirements of this clause if an employee has a nonforfeitable right to a percentage of the employee’s accrued benefit derived from employer contributions determined under the following table:
The nonforfeitable
Years of service:
percentage is:
2
20
3
40
4
60
5
80
6 or more
100.
(3)
(A)
A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that it is not payable if the participant dies (except in the case of a survivor annuity which is payable as provided in section
1055 of this title).
(B)
A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that the payment of benefits is suspended for such period as the employee is employed, subsequent to the commencement of payment of such benefits—
(i)
in the case of a plan other than a multiemployer plan, by an employer who maintains the plan under which such benefits were being paid; and
(ii)
in the case of a multiemployer plan, in the same industry, in the same trade or craft, and the same geographic area covered by the plan, as when such benefits commenced.
The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subparagraph, including regulations with respect to the meaning of the term “employed”.
(C)
A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because plan amendments may be given retroactive application as provided in section
1082
(d)(2) of this title.
(D)
(i)
A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that, in the case of a participant who does not have a nonforfeitable right to at least 50 percent of his accrued benefit derived from employer contributions, such accrued benefit may be forfeited on account of the withdrawal by the participant of any amount attributable to the benefit derived from mandatory contributions (as defined in the last sentence of section
1054
(c)(2)(C) of this title) made by such participant.
(ii)
Clause (i) shall not apply to a plan unless the plan provides that any accrued benefit forfeited under a plan provision described in such clause shall be restored upon repayment by the participant of the full amount of the withdrawal described in such clause plus, in the case of a defined benefit plan, interest. Such interest shall be computed on such amount at the rate determined for purposes of section
1054
(c)(2)(C) of this title (if such subsection applies) on the date of such repayment (computed annually from the date of such withdrawal). The plan provision required under this clause may provide that such repayment must be made
(I)
in the case of a withdrawal on account of separation from service, before the earlier of 5 years after the first date on which the participant is subsequently re-employed by the employer, or the close of the first period of 5 consecutive 1-year breaks in service commencing after the withdrawal; or
(iii)
In the case of accrued benefits derived from employer contributions which accrued before September 2, 1974, a right to such accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that an amount of such accrued benefit may be forfeited on account of the withdrawal by the participant of an amount attributable to the benefit derived from mandatory contributions, made by such participant before September 2, 1974, if such amount forfeited is proportional to such amount withdrawn. This clause shall not apply to any plan to which any mandatory contribution is made after September 2, 1974. The Secretary of the Treasury shall prescribe such regulations as may be necessary to carry out the purposes of this clause.
(E)
(i)
A right to an accrued benefit derived from employer contributions under a multiemployer plan shall not be treated as forfeitable solely because the plan provides that benefits accrued as a result of service with the participant’s employer before the employer had an obligation to contribute under the plan may not be payable if the employer ceases contributions to the multiemployer plan.
(F)
A matching contribution (within the meaning of section
401
(m) of title
26) shall not be treated as forfeitable merely because such contribution is forfeitable if the contribution to which the matching contribution relates is treated as an excess contribution under section
401
(k)(8)(B) of title
26, an excess deferral under section
402
(g)(2)(A) of title
26, an erroneous automatic contribution under section
414
(w) of title
26, or an excess aggregate contribution under section
401
(m)(6)(B) of title
26.
(b)
Computation of period of service
(1)
In computing the period of service under the plan for purposes of determining the nonforfeitable percentage under subsection (a)(2) of this section, all of an employee’s years of service with the employer or employers maintaining the plan shall be taken into account, except that the following may be disregarded:
(B)
years of service during a period for which the employee declined to contribute to a plan requiring employee contributions,[1]
(C)
years of service with an employer during any period for which the employer did not maintain the plan or a predecessor plan, defined by the Secretary of the Treasury;
(E)
years of service before January 1, 1971, unless the employee has had at least 3 years of service after December 31, 1970;
(F)
years of service before this part first applies to the plan if such service would have been disregarded under the rules of the plan with regard to breaks in service, as in effect on the applicable date; and
(G)
in the case of a multiemployer plan, years of service—
(i)
with an employer after—
(I)
a complete withdrawal of such employer from the plan (within the meaning of section
1383 of this title), or
(II)
to the extent permitted by regulations prescribed by the Secretary of the Treasury, a partial withdrawal described in section
1385
(b)(2)(A)(i) of this title in connection with the decertification of the collective bargaining representative; and
(ii)
with any employer under the plan after the termination date of the plan under section
1348 of this title.
(2)
(A)
For purposes of this section, except as provided in subparagraph (C), the term “year of service” means a calendar year, plan year, or other 12-consecutive month period designated by the plan (and not prohibited under regulations prescribed by the Secretary) during which the participant has completed 1,000 hours of service.
(B)
For purposes of this section, the term “hour of service” has the meaning provided by section
1052
(a)(3)(C) of this title.
(3)
(A)
For purposes of this paragraph, the term “1-year break in service” means a calendar year, plan year, or other 12-consecutive-month period designated by the plan (and not prohibited under regulations prescribed by the Secretary) during which the participant has not completed more than 500 hours of service.
(B)
For purposes of paragraph (1), in the case of any employee who has any 1-year break in service, years of service before such break shall not be required to be taken into account until he has completed a year of service after his return.
(C)
For purposes of paragraph (1), in the case of any participant in an individual account plan or an insured defined benefit plan which satisfies the requirements of subsection 1054(b)(1)(F) of this title who has 5 consecutive 1-year breaks in service, years of service after such 5-year period shall not be required to be taken into account for purposes of determining the nonforfeitable percentage of his accrued benefit derived from employer contributions which accrued before such 5-year period.
(D)
(i)
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 if the number of consecutive 1-year breaks in service within such period equals or exceeds the greater of—
(E)
(i)
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 has occurred, the hours described in clause (ii).
(ii)
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 absence,
except that the total number of hours treated as hours of service under this clause by reason of such pregnancy or placement shall not exceed 501 hours.
(iii)
The hours described in clause (ii) shall be treated as hours of service as provided in this subparagraph—
(iv)
For purposes of this subparagraph, the term “year” means the period used in computations pursuant to paragraph (2).
(c)
Plan amendments altering vesting schedule
(1)
(A)
A plan amendment changing any vesting schedule under the plan shall be treated as not satisfying the requirements of subsection (a)(2) of this section if the nonforfeitable percentage of the accrued benefit derived from employer contributions (determined as of the later of the date such amendment is adopted, or the date such amendment becomes effective) of any employee who is a participant in the plan is less than such nonforfeitable percentage computed under the plan without regard to such amendment.
(B)
A plan amendment changing any vesting schedule under the plan shall be treated as not satisfying the requirements of subsection (a)(2) of this section unless each participant having not less than 3 years of service is permitted to elect, within a reasonable period after adoption of such amendment, to have his nonforfeitable percentage computed under the plan without regard to such amendment.
(2)
Subsection (a) of this section shall not apply to benefits which may not be provided for designated employees in the event of early termination of the plan under provisions of the plan adopted pursuant to regulations prescribed by the Secretary of the Treasury to preclude the discrimination prohibited by section
401
(a)(4) of title
26.
(d)
Nonforfeitable benefits after lesser period and in greater amounts than required
A pension plan may allow for nonforfeitable benefits after a lesser period and in greater amounts than are required by this part.
(e)
Consent for distribution; present value; covered distributions
(1)
If the present value of any nonforfeitable benefit with respect to a participant in a plan exceeds $5,000, the plan shall provide that such benefit may not be immediately distributed without the consent of the participant.
(2)
For purposes of paragraph (1), the present value shall be calculated in accordance with section
1055
(g)(3) of this title.
(3)
This subsection shall not apply to any distribution of dividends to which section
404
(k) of title
26 applies.
(4)
A plan shall not fail to meet the requirements of this subsection if, under the terms of the plan, the present value of the nonforfeitable accrued benefit is determined without regard to that portion of such benefit which is attributable to rollover contributions (and earnings allocable thereto). For purposes of this subparagraph, the term “rollover contributions” means any rollover contribution under sections
402
(c),
403
(a)(4),
403
(b)(8),
408
(d)(3)(A)(ii), and
457
(e)(16) of title
26.
(f)
Special rules for plans computing accrued benefits by reference to hypothetical account balance or equivalent amounts
(1)
In general
An applicable defined benefit plan shall not be treated as failing to meet—
(B)
the requirements of section
1054
(c) or
1055
(g) of this title, or the requirements of subsection (e), with respect to accrued benefits derived from employer contributions,
solely because the present value of the accrued benefit (or any portion thereof) of any participant is, under the terms of the plan, equal to the amount expressed as the balance in the hypothetical account described in paragraph (3) or as an accumulated percentage of the participant’s final average compensation.
(2)
3-year vesting
In the case of an applicable defined benefit plan, such plan shall be treated as meeting the requirements of subsection (a)(2) only if an employee who has completed at least 3 years of service has a nonforfeitable right to 100 percent of the employee’s accrued benefit derived from employer contributions.
(3)
Applicable defined benefit plan and related rules
For purposes of this subsection—
(A)
In general
The term “applicable defined benefit plan” means a defined benefit plan under which the accrued benefit (or any portion thereof) is calculated as the balance of a hypothetical account maintained for the participant or as an accumulated percentage of the participant’s final average compensation.
[1] So in original. The comma probably should be a semicolon.