64. Minimum vesting schedules

Statement of Requirement: Code § 416(b); Rev. Proc. 2023-37, 2023-51 I.R.B. 1491, sec. 9.02

Sample Plan Language:

For any plan year in which this plan is top-heavy, one of the minimum vesting schedules as elected by the employer in the adoption agreement will automatically apply to the plan. The minimum vesting schedule applies to all benefits within the meaning of section 411(a)(7) of the Code except those attributable to employee contributions, including benefits accrued before the effective date of section 416 and benefits accrued before the plan became top-heavy. Further, no decrease in a participant's nonforfeitable percentage may occur in the event the plan's status as top-heavy changes for any plan year. However, this section does not apply to the account balances of any employee who does not have an hour of service after the plan has initially become top-heavy and such employee's account balance attributable to employer contributions and forfeitures will be determined without regard to this section.

Sample Adoption Agreement Language:

117 | 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

The nonforfeitable interest of each employee in his or her account balance attributable to employer contributions shall be determined on the basis of the following:

Option A

( ) 100% vesting after _____ (not to exceed 3) years of service.

Option B

( ) _____ % (not less than 20) vesting after 2 years of service.

( ) _____ % (not less than 40) vesting after 3 years of service.

( ) _____ % (not less than 60) vesting after 4 years of service.

( ) _____ % (not less than 80) vesting after 5 years of service.

( ) 100% vesting after 6 years of service.

If the vesting schedule under the plans shifts in or out of the above schedule for any plan year because of the plan's top-heavy status, such shift is an amendment to the vesting schedule and the election in section _____ of the plan applies.

(Note to reviewer: The blank should be filled in with the section number which corresponds to LRM #59.)

(Note to reviewer: Long-term part-time employees within the meaning of SECURE Act section 112 are not subject to any of the top-heavy provisions described in DC LRMs #61 through 64. See CODA LRM II.)