XVI. Forfeitures and vesting of matching contributions

Statement of Requirement: Code § 411(a)(2)(B); Rev. Rul, 2007-43, 2007-28 I.R.B. 45

(Note to reviewer: This provision is required if Matching Contributions are made. Matching Contributions are subject to the minimum vesting requirements of Code § 411. Section 411(a)(2)(B) requires that Matching Contributions satisfy either a 3-year cliff vesting schedule, or a 2-6-year graded vesting schedule. )

Sample Plan Language:

Matching Contributions shall be vested in accordance with section [ ] of the adoption agreement. In any event, Matching Contributions shall be fully vested at normal retirement age,

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upon the termination of the Plan, or, for affected participants, upon the partial termination or complete discontinuance of employer contributions to the Plan.

(Note to reviewer: See Rev. Rul. 2007-43 regarding a partial termination of a plan.)

Forfeitures of Matching Contributions, other than Excess Aggregate Contributions, shall be made in accordance with section [ ].

(Note to reviewer: The blank space in the preceding paragraph should refer to the Plan's forfeiture provisions applicable to employer contributions other than Elective Deferrals and Qualified Nonelective Contributions. In the alternative, a Provider may provide for specific forfeiture language applicable only to Matching Contributions. Except as otherwise provided in LRMs XI and XIV and discussed in the Notes to Reviewer in those sections regarding application of the January 18, 2017, proposed regulations, P lan language regarding application of forfeitures cannot can specify that they may be applied to fund Qualified Nonelective Contributions o r, Qualified Matching Contributions or Elective Deferrals. See also DC LRM #39.)

Sample Adoption Agreement Language:

Matching Contributions will be vested in accordance with the following schedule [ELECT ONE]:

[ ] a. Nonforfeitable when made.

[ ] b. The Plan's general vesting schedule, other than that for Elective Deferrals.

[ ] c. The following schedule. [PROVIDER MAY ADD ELECTIONS FOR ONE OR MORE OF THE VESTING SCHEDULES THAT COMPLY WITH CODE SECTION 411(A)(2)(B).]

(Note to reviewer: The following election is optional. An employer does not have to count years before 2021 for long-term part-time employees for vesting in employer contributions. However, it may do so optionally. If included, completion instructions should indicate that the Employer elect either a., b. or c., and may also optionally elect d.)

[ ] d. Vesting periods for Matching contributions for Long-Term Part-Time employees will be considered for periods beginning before January 1, 2021.

(Note to Reviewer: Section 125(d) of the SECURE 2.0 Act provides that a plan can disregard 12-month periods beginning before January 1, 2021, for purposes of applying the vesting rules of Code § 401(k)(15)(B)(iii). This means that a long-term part-time employee's vesting percentage in employer contributions is determined with regard to years of service

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after this date, to the extent the employee is credited with at least 500 hours of service in each 12-month period.)