58. Vesting for pre-break and post-break account

Statement of Requirement: Code § 411(a)(6)(C); Reg. § 1.411(b)-1(e)(2)

Sample Plan Language:

In the case of a participant who has 5 consecutive 1-year breaks in service, all years of service after such breaks in service will be disregarded for the purpose of vesting the employer-derived account balance that accrued before such breaks, but both pre-break and post-break service will count for the purposes of vesting the employer-derived account balance that accrues after such breaks. Both accounts will share in the earnings and losses of the fund.

In the case of a participant who does not have 5 consecutive 1-year breaks in service, both the pre-break and post-break service will count in vesting both the pre-break and post-break employer-derived account balance.

(Note to reviewer: If the plan also uses the rule of parity, then in lieu of LRM #57 and the above provision, the plan should use the following alternate provisions.)

In the case of a participant who has 5 or more consecutive 1-year breaks in service all service after such breaks in service will be disregarded for the purpose of vesting the employer-derived account balance that accrued before such breaks in service. Such participant's pre-break service will count in vesting the post-break employer-derived account balance only if either:

(i) such participant has any nonforfeitable interest in the account balance attributable to employer contributions at the time of separation from service; or

(ii) upon returning to service the number of consecutive 1-year breaks in service is less than the number of years of service. Separate accounts will be maintained for the participant's pre-break and post-break employer-derived account balance. Both accounts will share in the earnings and losses of the fund.

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