55. Crediting years of service - vesting

Statement of Requirement: Code § 411(a)(4)

Sample Adoption Agreement Language:

All of an employee's years of service with the employer are counted to determine the nonforfeitable percentage in the employee's account balance derived from employer contributions except:

( ) Years of service before age 18;

( ) Years of service during a period for which the employee made no mandatory contributions;

( ) Years of service before the employer maintained this plan or a predecessor plan;

( ) Years of service before January 1, 1971, unless the employee has had at least

266 | D e f i n e d C o n t r i b u t i o n P l a n L R M P a c k a g e 0 1 / 2 0 2 4

3 years of service after December 31, 1970;

( ) Years of service before the effective date of ERISA if such service would have been disregarded under the break in service rules of the prior plan in effect from time to time before such date. For this purpose, break in service rules are rules which result in the loss of prior vesting or benefit accruals, or which deny an employee eligibility to participate, by reason of separation or failure to complete a required period of service within a specified period of time.

( ) Years of service for Long-Term Part-Time employees prior to January 1, 2021.

(Note to Reviewer: Section 125(d) of the SECURE 2.0 Act of 2022 provides that a plan can disregard 12 -m onth periods beginning before January 1, 2021, for purposes of applying the vesting rules of IRC § 401(k)(15)(B)(iii). To the extent that a plan excludes years of service for long-term part-time employees, plan terms must apply an appropriate and compliant definition. See CODA LRM II.

Vesting rules under IRC § 401(k)(15)(B)(iii) state, for purposes of determining whether a long-term part-time employee has a nonforfeitable right to employer contributions (other than matching contributions described in paragraph (3)(D)(ii)) under the arrangement, each 12-month period for which the employee has at least 500 hours of service shall be treated as a year of service.

See also LRM #1 and CODA LRM II.)