73. Minimum vesting schedules

Statement of Requirement: Code §§I RC 411(a)(13)(B) and IRC 416(b); Notice 2007-6; Rev. Proc. 2017-41, sec. 2023-37, 9.02(5 .07)

Document Provision: _____

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 accrued benefits within the meaning of Code § IRC

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

411(a)(7) except those attributable to employee contributions, including benefits accrued before the effective date of Code § IRC 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 Accrued Benefit 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 Accrued Beneft attributable to employer contributions and forfeitures will be determined without regard to this section.

Sample Adoption Agreement Language:

The nonforfeitable interest of each participant in his or her accrued benefit attributable to employer contributions shall be determined on the basis of the following (mark one and fill in the blanks):

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

( ) _____% (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 plan shifts in and out of the above schedule for any plan year because of the plan’s top-heavy status, such shift is an amendment of 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 #65.)

(Note to reviewer: Notwithstanding the above, for any participant for whom all or a portion of the benefit is determined under a Cash Balance Formula, the vesting schedule must at all times be at least as favorable as three-year cliff vesting at all points in a Participant’s vesting computation. This rule applies to the entire benefit of such a Participant, even if a portion of the benefit is not determined under the Cash Balance Formula.)