26 USC 411 - Minimum vesting standards

U.S Code last checked for updates: Apr 26, 2024

§ 411.

Minimum vesting standards

(a)

General rule

A trust shall not constitute a qualified trust under section 401(a) unless the plan of which such trust is a part provides that an employee’s right to his normal retirement benefit is nonforfeitable upon the attainment of normal retirement age (as defined in paragraph (8)) and in addition satisfies the requirements of paragraphs (1), (2), and (11) of this subsection and the requirements of subsection (b)(3), and also satisfies, in the case of a defined benefit plan, the requirements of subsection (b)(1) and, in the case of a defined contribution plan, the requirements of subsection (b)(2).

(1)

Employee contributions

(2)

Employer contributions

(A)

Defined benefit plans

(i)

In general

(ii)

5-year vesting

(iii)

3 to 7 year vesting

(B)

Defined contribution plans

(i)

In general

(ii)

3-year vesting

(iii)

2 to 6 year vesting

(3)

Certain permitted forfeitures, suspensions, etc.

For purposes of this subsection—

(A)

Forfeiture on account of death

(B)

Suspension of benefits upon reemployment of retiree

A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that the payment of benefits is suspended for such period as the employee is employed, subsequent to the commencement of payment of such benefits—

(i)

in the case of a plan other than a multi-employer plan, by the employer who maintains the plan under which such benefits were being paid; and

(ii)

in the case of a multiemployer plan, in the same industry, the same trade or craft, and the same geographic area covered by the plan as when such benefits commenced.

The Secretary of Labor shall prescribe such regulations as may be necessary to carry out the purposes of this subparagraph, including regulations with respect to the meaning of the term “employed”.

(C)

Effect of retroactive plan amendments

(D)

Withdrawal of mandatory contribution

(i)

A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that, in the case of a participant who does not have a nonforfeitable right to at least 50 percent of his accrued benefit derived from employer contributions, such accrued benefit may be forfeited on account of the withdrawal by the participant of any amount attributable to the benefit derived from mandatory contributions (as defined in subsection (c)(2)(C)) made by such participant.

(ii)

Clause (i) shall not apply to a plan unless the plan provides that any accrued benefit forfeited under a plan provision described in such clause shall be restored upon repayment by the participant of the full amount of the withdrawal described in such clause plus, in the case of a defined benefit plan, interest. Such interest shall be computed on such amount at the rate determined for purposes of subsection (c)(2)(C) on the date of such repayment (computed annually from the date of such withdrawal). The plan provision required under this clause may provide that such repayment must be made (I) in the case of a withdrawal on account of separation from service, before the earlier of 5 years after the first date on which the participant is subsequently re-employed by the employer, or the close of the first period of 5 consecutive 1-year breaks in service commencing after the withdrawal; or (II) in the case of any other withdrawal, 5 years after the date of the withdrawal.

(iii)

In the case of accrued benefits derived from employer contributions which accrued before September 2, 1974, a right to such accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that an amount of such accrued benefit may be forfeited on account of the withdrawal by the participant of an amount attributable to the benefit derived from mandatory contributions (as defined in subsection (c)(2)(C)) made by such participant before September 2, 1974 if such amount forfeited is proportional to such amount withdrawn. This clause shall not apply to any plan to which any mandatory contribution is made after September 2, 1974. The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this clause.

(iv)

For purposes of this subparagraph, in the case of any class-year plan, a withdrawal of employee contributions shall be treated as a withdrawal of such contributions on a plan year by plan year basis in succeeding order of time.

(v)

For nonforfeitability where the employee has a nonforfeitable right to at least 50 percent of his accrued benefit, see section 401(a)(19).

(E)

Cessation of contributions under a multiemployer plan

(F)

Reduction and suspension of benefits by a multiemployer plan

A participant’s right to an accrued benefit derived from employer contributions under a multiemployer plan shall not be treated as forfeitable solely because—

(i)

the plan is amended to reduce benefits under section 4281 of the Employee Retirement Income Security Act of 1974, or

(ii)

benefit payments under the plan may be suspended under section 418E or under section 4281 of the Employee Retirement Income Security Act of 1974.

(G)

Treatment of matching contributions forfeited by reason of excess deferral or contribution or permissible withdrawal

(4)

Service included in determination of nonforfeitable percentage

In computing the period of service under the plan for purposes of determining the nonforfeitable percentage under paragraph (2), all of an employee’s years of service with the employer or employers maintaining the plan shall be taken into account, except that the following may be disregarded:

(A)

years of service before age 18;

(B)

years of service during a period for which the employee declined to contribute to a plan requiring employee contributions;

(C)

years of service with an employer during any period for which the employer did not maintain the plan or a predecessor plan (as defined under regulations prescribed by the Secretary);

(D)

service not required to be taken into account under paragraph (6);

(E)

years of service before January 1, 1971, unless the employee has had at least 3 years of service after December 31, 1970;

(F)

years of service before the first plan year to which this section applies, if such service would have been disregarded under the rules of the plan with regard to breaks in service as in effect on the applicable date; and

(G)

in the case of a multiemployer plan, years of service—

(i)

with an employer after—

(I)

a complete withdrawal of that employer from the plan (within the meaning of section 4203 of the Employee Retirement Income Security Act of 1974), or

(II)

to the extent permitted in regulations prescribed by the Secretary, a partial withdrawal described in section 4205(b)(2)(A)(i) of such Act in conjunction with the decertification of the collective bargaining representative, and

(ii)

with any employer under the plan after the termination date of the plan under section 4048 of such Act.

(5)

Year of service

(A)

General rule

(B)

Hours of service

(C)

Seasonal industries

(D)

Maritime industries

(6)

Breaks in service

(A)

Definition of 1-year break in service

(B)

1 year of service after 1-year break in service

(C)

5 consecutive 1-year breaks in service under defined contribution plan

(D)

Nonvested participants

(i)

In general

For purposes of paragraph (4), in the case of a nonvested participant, years of service with the employer or employers maintaining the plan before any period of consecutive 1-year breaks in service shall not be required to be taken into account if the number of consecutive 1-year breaks in service within such period equals or exceeds the greater of—

(I)

5, or

(II)

the aggregate number of years of service before such period.

(ii)

Years of service not taken into account

(iii)

Nonvested participant defined

(E)

Special rule for maternity or paternity absences

(i)

General rule

In the case of each individual who is absent from work for any period—

(I)

by reason of the pregnancy of the individual,

(II)

by reason of the birth of a child of the individual,

(III)

by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or

(IV)

for purposes of caring for such child for a period beginning immediately following such birth or placement,

the plan shall treat as hours of service, solely for purposes of determining under this paragraph whether a 1-year break in service has occurred, the hours described in clause (ii).

(ii)

Hours treated as hours of service

The hours described in this clause are—

(I)

the hours of service which otherwise would normally have been credited to such individual but for such absence, or

(II)

in any case in which the plan is unable to determine the hours described in subclause (I), 8 hours of service per day of absence,

except that the total number of hours treated as hours of service under this clause by reason of any such pregnancy or placement shall not exceed 501 hours.

(iii)

Year to which hours are credited

The hours described in clause (ii) shall be treated as hours of service as provided in this subparagraph—

(I)

only in the year in which the absence from work begins, if a participant would be prevented from incurring a 1-year break in service in such year solely because the period of absence is treated as hours of service as provided in clause (i); or

(II)

in any other case, in the immediately following year.

(iv)

Year defined

(v)

Information required to be filed

A plan shall not fail to satisfy the requirements of this subparagraph solely because it provides that no credit will be given pursuant to this subparagraph unless the individual furnishes to the plan administrator such timely information as the plan may reasonably require to establish—

(I)

that the absence from work is for reasons referred to in clause (i), and

(II)

the number of days for which there was such an absence.

(7)

Accrued benefit

(A)

In general

For purposes of this section, the term “accrued benefit” means—

(i)

in the case of a defined benefit plan, the employee’s accrued benefit determined under the plan and, except as provided in subsection (c)(3), expressed in the form of an annual benefit commencing at normal retirement age, or

(ii)

in the case of a plan which is not a defined benefit plan, the balance of the employee’s account.

(B)

Effect of certain distributions

Notwithstanding paragraph (4), for purposes of determining the employee’s accrued benefit under the plan, the plan may disregard service performed by the employee with respect to which he has received—

(i)

a distribution of the present value of his entire nonforfeitable benefit if such distribution was in an amount (not more than the dollar limit under section 411(a)(11)(A)) permitted under regulations prescribed by the Secretary, or

(ii)

a distribution of the present value of his nonforfeitable benefit attributable to such service which he elected to receive.

Clause (i) of this subparagraph shall apply only if such distribution was made on termination of the employee’s participation in the plan. Clause (ii) of this subparagraph shall apply only if such distribution was made on termination of the employee’s participation in the plan or under such other circumstances as may be provided under regulations prescribed by the Secretary.

(C)

Repayment of subparagraph (B) distributions

For purposes of determining the employee’s accrued benefit under a plan, the plan may not disregard service as provided in subparagraph (B) unless the plan provides an opportunity for the participant to repay the full amount of the distribution described in such subparagraph (B) with, in the case of a defined benefit plan, interest at the rate determined for purposes of subsection (c)(2)(C) and provides that upon such repayment the employee’s accrued benefit shall be recomputed by taking into account service so disregarded. This subparagraph shall apply only in the case of a participant who—

(i)

received such a distribution in any plan year to which this section applies, which distribution was less than the present value of his accrued benefit,

(ii)

resumes employment covered under the plan, and

(iii)

repays the full amount of such distribution with, in the case of a defined benefit plan, interest at the rate determined for purposes of subsection (c)(2)(C).

The plan provision required under this subparagraph may provide that such repayment must be made (I) in the case of a withdrawal on account of separation from service, before the earlier of 5 years after the first date on which the participant is subsequently re-employed by the employer, or the close of the first period of 5 consecutive 1-year breaks in service commencing after the withdrawal; or (II) in the case of any other withdrawal, 5 years after the date of the withdrawal.

(D)

Accrued benefit attributable to employee contributions

(8)

Normal retirement age

For purposes of this section, the term “normal retirement age” means the earlier of—

(A)

the time a plan participant attains normal retirement age under the plan, or

(B)

the later of—

(i)

the time a plan participant attains age 65, or

(ii)

the 5th anniversary of the time a plan participant commenced participation in the plan.

(9)

Normal retirement benefit

For purposes of this section, the term “normal retirement benefit” means the greater of the early retirement benefit under the plan, or the benefit under the plan commencing at normal retirement age. The normal retirement benefit shall be determined without regard to—

(A)

medical benefits, and

(B)

disability benefits not in excess of the qualified disability benefit.

For purposes of this paragraph, a qualified disability benefit is a disability benefit provided by a plan which does not exceed the benefit which would be provided for the participant if he separated from the service at normal retirement age. For purposes of this paragraph, the early retirement benefit under a plan shall be determined without regard to any benefits commencing before benefits payable under title II of the Social Security Act become payable which—

(i)

do not exceed such social security benefits, and

(ii)

terminate when such social security benefits commence.

(10)

Changes in vesting schedule

(A)

General rule

(B)

Election of former schedule

(11)

Restrictions on certain mandatory distributions

(A)

In general

(B)

Determination of present value

(C)

Dividend distributions of ESOPS arrangement

(D)

Special rule for rollover contributions

[(12)

Repealed. Pub. L. 109–280, title IX, § 904(a)(2), Aug. 17, 2006, 120 Stat. 1049]

(13)

Special rules for plans computing accrued benefits by reference to hypothetical account balance or equivalent amounts

(A)

In general

An applicable defined benefit plan shall not be treated as failing to meet—

(i)

subject to subparagraph (B), the requirements of subsection (a)(2), or

(ii)

the requirements of subsection (a)(11) or (c), or the requirements of section 417(e), with respect to accrued benefits derived from employer contributions,

solely because the present value of the accrued benefit (or any portion thereof) of any participant is, under the terms of the plan, equal to the amount expressed as the balance in the hypothetical account described in subparagraph (C) or as an accumulated percentage of the participant’s final average compensation.

(B)

3-year vesting

(C)

Applicable defined benefit plan and related rules

For purposes of this subsection—

(i)

In general

(ii)

Regulations to include similar plans

(b)

Accrued benefit requirements

(1)

Defined benefit plans

(A)

3-percent method

A defined benefit plan satisfies the requirements of this paragraph if the accrued benefit to which each participant is entitled upon his separation from the service is not less than—

(i)

3 percent of the normal retirement benefit to which he would be entitled if he commenced participation at the earliest possible entry age under the plan and served continuously until the earlier of age 65 or the normal retirement age specified under the plan, multiplied by

(ii)

the number of years (not in excess of 33⅓) of his participation in the plan.

In the case of a plan providing retirement benefits based on compensation during any period, the normal retirement benefit to which a participant would be entitled shall be determined as if he continued to earn annually the average rate of compensation which he earned during consecutive years of service, not in excess of 10, for which his compensation was the highest. For purposes of this subparagraph, social security benefits and all other relevant factors used to compute benefits shall be treated as remaining constant as of the current year for all years after such current year.

(B)

133⅓ percent rule

A defined benefit plan satisfies the requirements of this paragraph for a particular plan year if under the plan the accrued benefit payable at the normal retirement age is equal to the normal retirement benefit and the annual rate at which any individual who is or could be a participant can accrue the retirement benefits payable at normal retirement age under the plan for any later plan year is not more than 133⅓ percent of the annual rate at which he can accrue benefits for any plan year beginning on or after such particular plan year and before such later plan year. For purposes of this subparagraph—

(i)

any amendment to the plan which is in effect for the current year shall be treated as in effect for all other plan years;

(ii)

any change in an accrual rate which does not apply to any individual who is or could be a participant in the current year shall be disregarded;

(iii)

the fact that benefits under the plan may be payable to certain employees before normal retirement age shall be disregarded; and

(iv)

social security benefits and all other relevant factors used to compute benefits shall be treated as remaining constant as of the current year for all years after the current year.

(C)

Fractional rule

(D)

Accrual for service before effective date

Subparagraphs (A), (B), and (C) shall not apply with respect to years of participation before the first plan year to which this section applies, but a defined benefit plan satisfies the requirements of this subparagraph with respect to such years of participation only if the accrued benefit of any participant with respect to such years of participation is not less than the greater of—

(i)

his accrued benefit determined under the plan, as in effect from time to time prior to September 2, 1974, or

(ii)

an accrued benefit which is not less than one-half of the accrued benefit to which such participant would have been entitled if subparagraph (A), (B), or (C) applied with respect to such years of participation.

(E)

First two years of service

(F)

Certain insured defined benefit plans

Notwithstanding subparagraphs (A), (B), and (C), a defined benefit plan satisfies the requirements of this paragraph if such plan—

(i)

is funded exclusively by the purchase of insurance contracts, and

(ii)

satisfies the requirements of subparagraphs (B) and (C) of section 412(e)(3) (relating to certain insurance contract plans),

but only if an employee’s accrued benefit as of any applicable date is not less than the cash surrender value his insurance contracts would have on such applicable date if the requirements of subparagraphs (D), (E), and (F) of section 412(e)(3) were satisfied.

(G)

Accrued benefit may not decrease on account of increasing age or service

Notwithstanding the preceding subparagraphs, a defined benefit plan shall be treated as not satisfying the requirements of this paragraph if the participant’s accrued benefit is reduced on account of any increase in his age or service. The preceding sentence shall not apply to benefits under the plan commencing before entitlement to benefits payable under title II of the Social Security Act which benefits under the plan—

(i)

do not exceed such social security benefits, and

(ii)

terminate when such social security benefits commence.

(H)

Continued accrual beyond normal retirement age

(i)

In general

(ii)

Certain limitations permitted

(iii)

Adjustments under plan for delayed retirement taken into account

In the case of any employee who, as of the end of any plan year under a defined benefit plan, has attained normal retirement age under such plan—

(I)

if distribution of benefits under such plan with respect to such employee has commenced as of the end of such plan year, then any requirement of this subparagraph for continued accrual of benefits under such plan with respect to such employee during such plan year shall be treated as satisfied to the extent of the actuarial equivalent of inservice distribution of benefits, and

(II)

if distribution of benefits under such plan with respect to such employee has not commenced as of the end of such year in accordance with section 401(a)(14)(C), and the payment of benefits under such plan with respect to such employee is not suspended during such plan year pursuant to subsection (a)(3)(B), then any requirement of this subparagraph for continued accrual of benefits under such plan with respect to such employee during such plan year shall be treated as satisfied to the extent of any adjustment in the benefit payable under the plan during such plan year attributable to the delay in the distribution of benefits after the attainment of normal retirement age.

The preceding provisions of this clause shall apply in accordance with regulations of the Secretary. Such regulations may provide for the application of the preceding provisions of this clause, in the case of any such employee, with respect to any period of time within a plan year.

(iv)

Disregard of subsidized portion of early retirement benefit

(v)

Coordination with other requirements

(2)

Defined contribution plans

(A)

In general

(B)

Application to target benefit plans

(C)

Coordination with other requirements

(3)

Separate accounting required in certain cases

A plan satisfies the requirements of this paragraph if—

(A)

in the case of the defined benefit plan, the plan requires separate accounting for the portion of each employee’s accrued benefit derived from any voluntary employee contributions permitted under the plan; and

(B)

in the case of any plan which is not a defined benefit plan, the plan requires separate accounting for each employee’s accrued benefit.

(4)

Year of participation

(A)

Definition

(B)

Less than full time service

(C)

Less than 1,000 hours of service during year

(D)

Seasonal industries

(E)

Maritime industries

(5)

Special rules relating to age

(A)

Comparison to similarly situated younger individual

(i)

In general

(ii)

Similarly situated

(iii)

Disregard of subsidized early retirement benefits

(iv)

Accrued benefit

(B)

Applicable defined benefit plans

(i)

Interest credits

(I)

In general

(II)

Preservation of capital

(III)

Market rate of return

(ii)

Special rule for plan conversions

(iii)

Rate of benefit accrual

Subject to clause (iv), the requirements of this clause are met with respect to any participant if the accrued benefit of the participant under the terms of the plan as in effect after the amendment is not less than the sum of—

(I)

the participant’s accrued benefit for years of service before the effective date of the amendment, determined under the terms of the plan as in effect before the amendment, plus

(II)

the participant’s accrued benefit for years of service after the effective date of the amendment, determined under the terms of the plan as in effect after the amendment.

(iv)

Special rules for early retirement subsidies

(v)

Applicable plan amendment

For purposes of this subparagraph—

(I)

In general

(II)

Special rule for coordinated benefits

(III)

Multiple amendments

(IV)

Applicable defined benefit plan

(vi)

Termination requirements

An applicable defined benefit plan shall not be treated as meeting the requirements of clause (i) unless the plan provides that, upon the termination of the plan—

(I)

if the interest credit rate (or an equivalent amount) under the plan is a variable rate, the rate of interest used to determine accrued benefits under the plan shall be equal to the average of the rates of interest used under the plan during the 5-year period ending on the termination date, and

(II)

the interest rate and mortality table used to determine the amount of any benefit under the plan payable in the form of an annuity payable at normal retirement age shall be the rate and table specified under the plan for such purpose as of the termination date, except that if such interest rate is a variable rate, the interest rate shall be determined under the rules of subclause (I).

(C)

Certain offsets permitted

(D)

Permitted disparities in plan contributions or benefits

(E)

Indexing permitted

(i)

In general

(ii)

Protection against loss

(iii)

Indexing

(F)

Early retirement benefit or retirement-type subsidy

(G)

Benefit accrued to date

(6)

Projected interest crediting rate

(c)

Allocation of accrued benefits between employer and employee contributions

(1)

Accrued benefit derived from employer contributions

(2)

Accrued benefit derived from employee contributions

(A)

Plans other than defined benefit plans

In the case of a plan other than a defined benefit plan, the accrued benefit derived from contributions made by an employee as of any applicable date is—

(i)

except as provided in clause (ii), the balance of the employee’s separate account consisting only of his contributions and the income, expenses, gains, and losses attributable thereto, or

(ii)

if a separate account is not maintained with respect to an employee’s contributions under such a plan, the amount which bears the same ratio to his total accrued benefit as the total amount of the employee’s contributions (less withdrawals) bears to the sum of such contributions and the contributions made on his behalf by the employer (less withdrawals).

(B)

Defined benefit plans

(C)

Definition of accumulated contributions

For purposes of this subsection, the term “accumulated contribution” means the total of—

(i)

all mandatory contributions made by the employee,

(ii)

interest (if any) under the plan to the end of the last plan year to which subsection (a)(2) does not apply (by reason of the applicable effective date), and

(iii)

interest on the sum of the amounts determined under clauses (i) and (ii) compounded annually—

(I)

at the rate of 120 percent of the Federal mid-term rate (as in effect under section 1274 for the 1st month of a plan year) for the period beginning with the 1st plan year to which subsection (a)(2) applies (by reason of the applicable effective date) and ending with the date on which the determination is being made, and

(II)

at the interest rate which would be used under the plan under section 417(e)(3) (as of the determination date) for the period beginning with the determination date and ending on the date on which the employee attains normal retirement age.

For purposes of this subparagraph, the term “mandatory contributions” means amounts contributed to the plan by the employee which are required as a condition of employment, as a condition of participation in such plan, or as a condition of obtaining benefits under the plan attributable to employer contributions.

(D)

Adjustments

(3)

Actuarial adjustment

(d)

Special rules

(1)

Coordination with section 401(a)(4)

A plan which satisfies the requirements of this section shall be treated as satisfying any vesting requirements resulting from the application of section 401(a)(4) unless—

(A)

there has been a pattern of abuse under the plan (such as a dismissal of employees before their accrued benefits become nonforfeitable) tending to discriminate in favor of employees who are highly compensated employees (within the meaning of section 414(q)), or

(B)

there have been, or there is reason to believe there will be, an accrual of benefits or forfeitures tending to discriminate in favor of employees who are highly compensated employees (within the meaning of section 414(q)).

(2)

Prohibited discrimination

(3)

Termination or partial termination; discontinuance of contributions

Notwithstanding the provisions of subsection (a), a trust shall not constitute a qualified trust under section 401(a) unless the plan of which such trust is a part provides that—

(A)

upon its termination or partial termination, or

(B)

in the case of a plan to which section 412 does not apply, upon complete discontinuance of contributions under the plan,

the rights of all affected employees to benefits accrued to the date of such termination, partial termination, or discontinuance, to the extent funded as of such date, or the amounts credited to the employees’ accounts, are nonforfeitable. This paragraph shall not apply to benefits or contributions which, under provisions of the plan adopted pursuant to regulations prescribed by the Secretary to preclude the discrimination prohibited by section 401(a)(4), may not be used for designated employees in the event of early termination of the plan. For purposes of this paragraph, in the case of the complete discontinuance of contributions under a profit-sharing or stock bonus plan, such plan shall be treated as having terminated on the day on which the plan administrator notifies the Secretary (in accordance with regulations) of the discontinuance.

[(4)

Repealed. Pub. L. 99–514, title XI, § 1113(b), Oct. 22, 1986, 100 Stat. 2447]

(5)

Treatment of voluntary employee contributions

(6)

Accrued benefit not to be decreased by amendment

(A)

In general

(B)

Treatment of certain plan amendments

For purposes of subparagraph (A), a plan amendment which has the effect of—

(i)

eliminating or reducing an early retirement benefit or a retirement-type subsidy (as defined in regulations), or

(ii)

eliminating an optional form of benefit,

with respect to benefits attributable to service before the amendment shall be treated as reducing accrued benefits. In the case of a retirement-type subsidy, the preceding sentence shall apply only with respect to a participant who satisfies (either before or after the amendment) the preamendment conditions for the subsidy. The Secretary shall by regulations provide that this subparagraph shall not apply to any plan amendment which reduces or eliminates benefits or subsidies which create significant burdens or complexities for the plan and plan participants, unless such amendment adversely affects the rights of any participant in a more than de minimis manner. The Secretary may by regulations provide that this subparagraph shall not apply to a plan amendment described in clause (ii) (other than a plan amendment having an effect described in clause (i)).

(C)

Special rule for ESOPS

For purposes of this paragraph, any—

(i)

tax credit employee stock ownership plan (as defined in section 409(a)), or

(ii)

employee stock ownership plan (as defined in section 4975(e)(7)),

shall not be treated as failing to meet the requirements of this paragraph merely because it modifies distribution options in a nondiscriminatory manner.

(D)

Plan transfers

(i)

In general

A defined contribution plan (in this subparagraph referred to as the “transferee plan”) shall not be treated as failing to meet the requirements of this subsection merely because the transferee plan does not provide some or all of the forms of distribution previously available under another defined contribution plan (in this subparagraph referred to as the “transferor plan”) to the extent that—

(I)

the forms of distribution previously available under the transferor plan applied to the account of a participant or beneficiary under the transferor plan that was transferred from the transferor plan to the transferee plan pursuant to a direct transfer rather than pursuant to a distribution from the transferor plan,

(II)

the terms of both the transferor plan and the transferee plan authorize the transfer described in subclause (I),

(III)

the transfer described in subclause (I) was made pursuant to a voluntary election by the participant or beneficiary whose account was transferred to the transferee plan,

(IV)

the election described in subclause (III) was made after the participant or beneficiary received a notice describing the consequences of making the election, and

(V)

the transferee plan allows the participant or beneficiary described in subclause (III) to receive any distribution to which the participant or beneficiary is entitled under the transferee plan in the form of a single sum distribution.

(ii)

Special rule for mergers, etc.

(E)

Elimination of form of distribution

(i)

a single sum payment is available to such participant at the same time or times as the form of distribution being eliminated, and

(ii)

such single sum payment is based on the same or greater portion of the participant’s account as the form of distribution being eliminated.

(e)

Application of vesting standards to certain plans

(1)

The provisions of this section (other than paragraph (2)) shall not apply to—

(A)

a governmental plan (within the meaning of section 414(d)),

(B)

a church plan (within the meaning of section 414(e)) with respect to which the election provided by section 410(d) has not been made,

(C)

a plan which has not, at any time after September 2, 1974, provided for employer contributions, and

(D)

a plan established and maintained by a society, order, or association described in section 501(c)(8) or (9), if no part of the contributions to or under such plan are made by employers of participants in such plan.

(2)

A plan described in paragraph (1) shall be treated as meeting the requirements of this section, for purposes of section 401(a), if such plan meets the vesting requirements resulting from the application of sections 401(a)(4) and 401(a)(7) as in effect on September 1, 1974.

(f)

Special rule for determining normal retirement age for certain existing defined benefit plans

(1)

In general

(2)

Applicable plan

For purposes of this subsection—

(A)

In general

The term “applicable plan” means a defined benefit plan the terms of which, on or before December 8, 2014, provided for a normal retirement age which is the earlier of—

(i)

an age otherwise permitted under subsection (a)(8), or

(ii)

the age at which a participant completes the number of years (not less than 30 years) of benefit accrual service specified by the plan.

A plan shall not fail to be treated as an applicable plan solely because the normal retirement age described in the preceding sentence only applied to certain participants or only applied to employees of certain employers in the case of a plan maintained by more than 1 employer.

(B)

Expanded application

(C)

Limitation on expanded application

A defined benefit plan shall be an applicable plan only with respect to an individual who—

(i)

is a participant in the plan on or before January 1, 2017, or

(ii)

is an employee at any time on or before January 1, 2017, of any employer maintaining the plan, and who becomes a participant in such plan after such date.

(Added Pub. L. 93–406, title II, § 1012(a), Sept. 2, 1974, 88 Stat. 901; amended Pub. L. 94–455, title XIX, §§ 1901(a)(62), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1774, 1834; Pub. L. 96–364, title II, § 206, Sept. 26, 1980, 94 Stat. 1287; Pub. L. 98–397, title II, § 202(b), (c), (d)(2), (e)(2), (3), (f), 205, title III, § 301(a)(1), Aug. 23, 1984, 98 Stat. 1437, 1439, 1440, 1449, 1450; Pub. L. 99–509, title IX, §§ 9202(b), 9203(b)(2), Oct. 21, 1986, 100 Stat. 1977, 1979; Pub. L. 99–514, title XI, §§ 1113(a), (b), (d)(B), 1114(b)(10), 1139(a), title XVIII, § 1898(a)(1)(A), (4)(A), (d)(1)(A), (2)(A), (f)(1)(A), Oct. 22, 1986, 100 Stat. 2446, 2447, 2451, 2487, 2941, 2943, 2955, 2956; Pub. L. 100–203, title IX, § 9346(b), Dec. 22, 1987, 101 Stat. 1330–374; Pub. L. 100–647, title I, § 1018(t)(8)(B), Nov. 10, 1988, 102 Stat. 3589; Pub. L. 101–239, title VII, §§ 7861(a)(5)(A), (6)(A), 7871(a)(1), (2), (b)(1), 7881(m)(1), Dec. 19, 1989, 103 Stat. 2430, 2435, 2443; Pub. L. 102–318, title V, § 521(b)(44), July 3, 1992, 106 Stat. 313; Pub. L. 103–465, title VII, § 767(a)(1), Dec. 8, 1994, 108 Stat. 5037; Pub. L. 104–188, title I, § 1442(a), Aug. 20, 1996, 110 Stat. 1808; Pub. L. 105–34, title X, § 1071(a)(1), (2)(A), Aug. 5, 1997, 111 Stat. 948; Pub. L. 107–16, title VI, §§ 633(a), 645(a)(1), (b)(1), 648(a)(1), June 7, 2001, 115 Stat. 115, 123, 125, 127; Pub. L. 108–311, title IV, § 408(a)(14), Oct. 4, 2004, 118 Stat. 1192; Pub. L. 109–280, title I, § 114(b), title VII, 701(b), title IX, §§ 902(d)(2)(A), (B), 904(a), Aug. 17, 2006, 120 Stat. 853, 984, 1038, 1048; Pub. L. 110–458, title I, §§ 101(d)(2)(D), 107(b), 109(b)(2), Dec. 23, 2008, 122 Stat. 5099, 5107, 5111; Pub. L. 113–235, div. P, § 2(b), Dec. 16, 2014, 128 Stat. 2828; Pub. L. 115–141, div. U, title IV, § 401(a)(82), (b)(19), Mar. 23, 2018, 132 Stat. 1188, 1202; Pub. L. 117–328, div. T, title III, §§ 304(a), 348(a), Dec. 29, 2022, 136 Stat. 5341, 5385.)

cite as: 26 USC 411

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