29. Definition of year of participation (accrual computation period)

Statement of Requirement: Reg. §§ Treas. Regs. 1.401(a)(26)6(b)(7), 1.410(b)- 6(f); DOL Reg. § 2530.204-2; Rev. Proc. 2017- 41,sec. 5.16 2023-37, 9.03(1)

Document Provision: _____

Sample Plan Language (Standardized Plan):

Year of participation shall mean a plan year during which an employee is eligible to participate in the plan.

Optional Plan Language (Standardized Plans)

However, if elected in the adoption agreement, a year of participation does not include a plan year in which an employee who is eligible to participate terminates service with not more than 500 hours of service and is not an active employee on the last day of the plan year.

Sample Adoption Agreement Language (Standardized Plan)::

1. A year of participation

( ) will

( ) will not

include a plan year in which an employee who is eligible to participate terminates service with not more than 500 hours of service and is not an active employee on the last day of the plan year.

(Note to reviewer: A plan may provide options as to whether some or all of the employees described in Code §I RC 410(a)(1) or Code §I RC 410(b)(3) are excluded, provided that the criteria for excluding employees therein apply uniformly to all employees.)

Sample Plan Language (Nonstandardized Plan):

232 | Defined Benefit Plan LRM Package 08/2020 06/2026

Year of participation shall mean a plan year during which the participant completes the number of hours of service for a full year of service, as described in section 2. of the adoption agreement. If the participant either completes more than the minimum number of hours of service, as described in section 3. of the adoption agreement, during the plan year but has less than the number of hours of service for a full year of service, as described in section 2. of the adoption agreement, such participant shall receive an accrual for such year which bears the same ratio to a full accrual as the number of hours of service the participant actually completes bears to the number of hours of service for a full year of service, as described in section 2. of the adoption agreement. Such participant’s benefit for such partial year shall be based upon the compensation the participant would have earned if the participant had completed the number of hours of service for a full year of service, as described in section 2. of the adoption agreement.

Sample Adoption Agreement Language (Nonstandardized plan):

2. The number of hours of service required for a full year of service in a plan year is: _____

3. The minimum number of hours of service to receive partial credit in a plan year is: _____ (must be no more than 1,000)

(Note to reviewer: A Nonstandardized Plan may require, as an option in the adoption agreement, that a participant must complete a specified number of hours in order to earn a year of participation, if it also provides appropriate partial credit in accordance with DOL Reg. § 2530-204-2.)

(Note to reviewer: The sample plan language above provides that years of participation are determined based on the plan year. A Nonstandardized Plan may determine years of participation on the basis of any 12-month period ending within the plan year, by election in the adoption agreement.)

(Note to reviewer: A plan that utilizes elapsed time in lieu of counting hours of service may substitute the completion of either 91 consecutive calendar days or 3 consecutive calendar months for 500 hours of service in the above sample language.)

(Note to reviewer: A Standardized Plan generally may not deny an accrual to an employee eligible to participate merely because the employee is not an active employee on the last day of the plan year or has failed to complete a specified number of hours of service during the year. H owever, a Standardized Plan may deny an accrual to an employee who is eligible to participate if the employee terminates service during the plan year with not more than 500 hours of service and is not an active employee on the last day of the plan year.)