§ 1053 TITLE 29—LABOR Page 382

Pub. L. 101–239, §7891(a)(1), substituted ‘‘Internal Revenue Code of 1986’’ for ‘‘Internal Revenue Code of 1954’’,

which for purposes of codification was translated as

‘‘title 26’’ thus requiring no change in text.

Subsec. (a)(2). Pub. L. 101–239, §7892(a), struck out

comma after ‘‘specified age’’.

Subsec. (b)(2). Pub. L. 101–239, §7894(c)(2)(B), substituted ‘‘a plan’’ for ‘‘the plan’’.

1986—Subsec. (a)(1)(B)(i). Pub. L. 99–514, as amended

by Pub. L. 101–239, §7861(a)(2), substituted ‘‘2 years of

service’’ for ‘‘3 years of service’’ in two places.

Subsec. (a)(2). Pub. L. 99–509 substituted a period for

‘‘unless—

‘‘(A) the plan is a—

‘‘(i) defined benefit plan, or

‘‘(ii) target benefit plan (as defined under regulations prescribed by the Secretary of the Treasury),

and

‘‘(B) such employees begin employment with the

employer after they have attained a specified age

which is not more than 5 years before the normal retirement age under the plan.’’

1984—Subsec. (a)(1). Pub. L. 98–397, §102(a), substituted ‘‘21’’ for ‘‘25’’ in subpar. (A)(i) and ‘‘‘26’ for

‘21’’’ for ‘‘‘30’ for ‘25’’’ in subpar. (B)(ii).

Subsec. (b)(4). Pub. L. 98–397, §102(d)(1), amended par.

(4) generally. Prior to amendment, par. (4) read as follows: ‘‘In the case of an employee who does not have

any nonforfeitable right to an accrued benefit derived

from employer contributions, years of service with the

employer or employers maintaining the plan before a

break in service shall not be required to be taken into

account in computing the period of service for purposes

of subsection (a)(1) of this section if the number of consecutive 1-year breaks in service equals or exceeds the

aggregate number of such years of service before such

break. Such aggregate number of years of service before such break shall be deemed not to include any

years of service not required to be taken into account

under this paragraph by reason of any prior break in

service.’’

Subsec. (b)(5). Pub. L. 98–397, §102(e)(1), added par. (5).

EFFECTIVE DATE OF 1989 AMENDMENT

Amendment by section 7861(a)(2) of Pub. L. 101–239 effective as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 7863 of Pub. L. 101–239, set out

as a note under section 106 of Title 26, Internal Revenue

Code.

Amendment by section 7891(a)(1) of Pub. L. 101–239 effective, except as otherwise provided, as if included in

the provision of the Tax Reform Act of 1986, Pub. L.

99–514, to which such amendment relates, see section

7891(f) of Pub. L. 101–239, set out as a note under section

1002 of this title.

Section 7892(c) of Pub. L. 101–239 provided that: ‘‘Any

amendment made by this section [amending this section and section 1082 of this title] shall take effect as

if included in the provision of the Omnibus Budget Reconciliation Act of 1987 [Pub. L. 100–203, probably should

refer to Omnibus Budget Reconciliation Act of 1986,

Pub. L. 99–509] or Pension Protection Act [Pub. L.

100–203, §§9302–9346, probably should refer to Omnibus

Budget Reconciliation Act of 1987, Pub. L. 100–203] to

which such amendment relates.’’

Amendment by section 7894(c)(2) of Pub. L. 101–239 effective, except as otherwise provided, as if originally

included in the provision of the Employee Retirement

Income Security Act of 1974, Pub. L. 93–406, to which

such amendment relates, see section 7894(i) of Pub. L.

101–239, set out as a note under section 1002 of this title.

EFFECTIVE DATE OF 1986 AMENDMENTS

Amendment by section 1113(e)(3) of Pub. L. 99–514 applicable to plan years beginning after Dec. 31, 1988, with

special rule for plans maintained pursuant to collective

bargaining agreements ratified before Mar. 1, 1986, and

not applicable to employees who do not have 1 hour of

service in any plan year to which the amendment applies, see section 1113(f) of Pub. L. 99–514, as amended,

set out as a note under section 411 of Title 26, Internal

Revenue Code.

Amendment by Pub. L. 99–509 applicable only with respect to plan years beginning on or after Jan. 1, 1988,

and only with respect to service performed on or after

such date, see section 9204 of Pub. L. 99–509, set out as

an Effective and Termination Dates of 1986 Amendments note under section 623 of this title.

EFFECTIVE DATE OF 1984 AMENDMENT

Amendment by Pub. L. 98–397 applicable to plan years

beginning after Dec. 31, 1984, except as otherwise provided, see sections 302 and 303 of Pub. L. 98–397, set out

as a note under section 1001 of this title.

REGULATIONS

Secretary of Labor, Secretary of the Treasury, and

Equal Employment Opportunity Commission each to

issue before Feb. 1, 1988, final regulations to carry out

amendments made by Pub. L. 99–509, see section 9204 of

Pub. L. 99–509, set out as an Effective and Termination

Dates of 1986 Amendment note under section 623 of this

title.

Secretary authorized, effective Sept. 2, 1974, to promulgate regulations wherever provisions of this subchapter call for the promulgation of regulations, see

section 1031 of this title.

PLAN AMENDMENTS NOT REQUIRED UNTIL

JANUARY 1, 1989

For provisions directing that if any amendments

made by subtitle A or subtitle C of title XI [§§1101–1147

and 1171–1177] or title XVIII [§§1800–1899A] of Pub. L.

99–514 require an amendment to any plan, such plan

amendment shall not be required to be made before the

first plan year beginning on or after Jan. 1, 1989, see

section 1140 of Pub. L. 99–514, as amended, set out as a

note under section 401 of Title 26, Internal Revenue

Code.

For provisions directing that if any amendments

made by Pub. L. 99–509 require an amendment to any

plan, such plan amendment shall not be required to be

made before the first plan year beginning on or after

Jan. 1, 1989, see section 9204 of Pub. L. 99–509, set out as

an Effective and Termination Dates of 1986 Amendment

note under section 623 of this title.

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1002, 1053, 1054,

1060, 1061 of this title.

§ 1053. Minimum vesting standards

(a) Nonforfeitability requirements

Each pension plan shall provide that an employee’s right to his normal retirement benefit

is nonforfeitable upon the attainment of normal

retirement age and in addition shall satisfy the

requirements of paragraphs (1) and (2) of this

subsection.

(1) A plan satisfies the requirements of this

paragraph if an employee’s rights in his accrued benefit derived from his own contributions are nonforfeitable.

(2) A plan satisfies the requirements of this

paragraph if it satisfies the requirements of

subparagraph (A) or (B).

(A) A plan satisfies the requirements of

this subparagraph if an employee who has

completed at least 5 years of service has a

nonforfeitable right to 100 percent of the employee’s accrued benefit derived from employer contributions.

(B) A plan satisfies the requirements of

this subparagraph if an employee has a non-
Page 383 TITLE 29—LABOR § 1053

forfeitable right to a percentage of the employee’s accrued benefit derived from employer contributions determined under the

following table:

The nonforfeitable

Years of service: percentage is:

3 ........................................................... 20

4 ........................................................... 40

5 ........................................................... 60

6 ........................................................... 80

7 or more .............................................. 100.

(3)(A) A right to an accrued benefit derived

from employer contributions shall not be

treated as forfeitable solely because the plan

provides that it is not payable if the participant dies (except in the case of a survivor annuity which is payable as provided in section

1055 of this title).

(B) 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 multiemployer plan, by an 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, in the same trade or

craft, and the same geographic area covered

by the plan, as when such benefits commenced.

The Secretary 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) A right to an accrued benefit derived

from employer contributions shall not be

treated as forfeitable solely because plan

amendments may be given retroactive application as provided in section 1082(c)(8) of this

title.

(D)(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 the last sentence of

section 1054(c)(2)(C) of this title) 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 section

1054(c)(2)(C) of this title (if such subsection applies) 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, 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 of the Treasury 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) Cross reference.—

For nonforfeitability where the employee has a

nonforfeitable right to at least 50 percent of his accrued benefit, see section 1056(c) of this title.

(E)(i) A right to an accrued benefit derived

from employer contributions under a multiemployer plan shall not be treated as forfeitable

solely because the plan provides that benefits

accrued as a result of service with the participant’s employer before the employer had an

obligation to contribute under the plan may

not be payable if the employer ceases contributions to the multiemployer plan.

(ii) 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 1425 or 1441 of this title, or

(II) benefit payments under the plan may

be suspended under section 1426 or 1441 of

this title.

(F) A matching contribution (within the

meaning of section 401(m) of title 26) shall not

be treated as forfeitable merely because such

contribution is forfeitable if the contribution

to which the matching contribution relates is

treated as an excess contribution under section 401(k)(8)(B) of title 26, an excess deferral

under section 402(g)(2)(A) of title 26, or an excess aggregate contribution under section

401(m)(6)(B) of title 26.

(b) Computation of period of service

(1) In computing the period of service under

the plan for purposes of determining the non-
§ 1053 TITLE 29—LABOR Page 384

1So in original. The comma probably should be a semicolon.

forfeitable percentage under subsection (a)(2) of

this section, 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 18,1

(B) years of service during a period for which

the employee declined to contribute to a plan

requiring employee contributions,1

(C) years of service with an employer during

any period for which the employer did not

maintain the plan or a predecessor plan, defined by the Secretary of the Treasury;

(D) service not required to be taken into account under paragraph (3);

(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 this part first applies to the plan 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 such employer from the plan (within the meaning

of section 1383 of this title), or

(II) to the extent permitted by regulations prescribed by the Secretary of the

Treasury, a partial withdrawal described

in section 1385(b)(2)(A)(i) of this title in

connection 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 1348 of this title.

(2)(A) For purposes of this section, except as

provided in subparagraph (C), the term ‘‘year of

service’’ means a calendar year, plan year, or

other 12-consecutive month period designated by

the plan (and not prohibited under regulations

prescribed by the Secretary) during which the

participant has completed 1,000 hours of service.

(B) For purposes of this section, the term

‘‘hour of service’’ has the meaning provided by

section 1052(a)(3)(C) of this title.

(C) In the case of any seasonal industry where

the customary period of employment is less

than 1,000 hours during a calendar year, the

term ‘‘year of service’’ shall be such period as

determined under regulations of the Secretary.

(D) For purposes of this section, in the case of

any maritime industry, 125 days of service shall

be treated as 1,000 hours of service. The Secretary may prescribe regulations to carry out

the purposes of this subparagraph.

(3)(A) For purposes of this paragraph, the term

‘‘1-year break in service’’ means a calendar year,

plan year, or other 12-consecutive-month period

designated by the plan (and not prohibited under

regulations prescribed by the Secretary) during

which the participant has not completed more

than 500 hours of service.

(B) For purposes of paragraph (1), in the case

of any employee who has any 1-year break in

service, years of service before such break shall

not be required to be taken into account until

he has completed a year of service after his return.

(C) For purposes of paragraph (1), in the case

of any participant in an individual account plan

or an insured defined benefit plan which satisfies the requirements of subsection 1054(b)(1)(F)

of this title who has 5 consecutive 1-year breaks

in service, years of service after such 5-year period shall not be required to be taken into account for purposes of determining the nonforfeitable percentage of his accrued benefit derived from employer contributions which accrued before such 5-year period.

(D)(i) For purposes of paragraph (1), 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) If any years of service are not required to

be taken into account by reason of a period of

breaks in service to which clause (i) applies,

such years of service shall not be taken into account in applying clause (i) to a subsequent period of breaks in service.

(iii) For purposes of clause (i), the term ‘‘nonvested participant’’ means a participant who

does not have any nonforfeitable right under the

plan to an accrued benefit derived from employer contributions.

(E)(i) 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) 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

such pregnancy or placement shall not exceed

501 hours.

(iii) 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
Page 385 TITLE 29—LABOR § 1053

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) For purposes of this subparagraph, the

term ‘‘year’’ means the period used in computations pursuant to paragraph (2).

(v) A plan may provide 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.

(4) Cross references.—

(A) For definitions of ‘‘accrued benefit’’ and ‘‘normal retirement age’’, see sections 1002(23) and (24)

of this title;

(B) For effect of certain cash out distributions, see

section 1054(d)(1) of this title.

(c) Plan amendments altering vesting schedule

(1)(A) A plan amendment changing any vesting

schedule under this plan shall be treated as not

satisfying the requirements of subsection (a)(2)

of this section if the nonforfeitable percentage

of the accrued benefit derived from employer

contributions (determined as of the later of the

date such amendment is adopted, or the date

such amendment becomes effective) of any employee who is a participant in the plan is less

than such nonforfeitable percentage computed

under the plan without regard to such amendment.

(B) A plan amendment changing any vesting

schedule under the plan shall be treated as not

satisfying the requirements of subsection (a)(2)

of this section unless each participant having

not less than 3 years of service is permitted to

elect, within a reasonable period after adoption

of such amendment, to have his nonforfeitable

percentage computed under the plan without regard to such amendment.

(2) Subsection (a) of this section shall not

apply to benefits which may not be provided for

designated employees in the event of early termination of the plan under provisions of the

plan adopted pursuant to regulations prescribed

by the Secretary of the Treasury to preclude the

discrimination prohibited by section 401(a)(4) of

title 26.

(d) Nonforfeitable benefits after lesser period

and in greater amounts than required

A pension plan may allow for nonforfeitable

benefits after a lesser period and in greater

amounts than are required by this part.

(e) Consent for distribution; present value; covered distributions

(1) If the present value of any nonforfeitable

benefit with respect to a participant in a plan

exceeds $5,000, the plan shall provide that such

benefit may not be immediately distributed

without the consent of the participant.

(2) For purposes of paragraph (1), the present

value shall be calculated in accordance with section 1055(g)(3) of this title.

(3) This subsection shall not apply to any distribution of dividends to which section 404(k) of

title 26 applies.

(Pub. L. 93–406, title I, §203, Sept. 2, 1974, 88 Stat.

854; Pub. L. 96–364, title III, §303, Sept. 26, 1980,

94 Stat. 1292; Pub. L. 98–397, title I, §§102(b), (c),

(d)(2), (e)(2), 105(a), Aug. 23, 1984, 98 Stat.

1426–1428, 1436; Pub. L. 99–514, title XI,

§§1113(e)(1), (2), (4)(A), 1139(c)(1), title XVIII,

§1898(a)(1)(B), (4)(B)(i), (d)(1)(B), (2)(B), Oct. 22,

1986, 100 Stat. 2447, 2448, 2487, 2942, 2944, 2955; Pub.

L. 101–239, title VII, §§7861(a)(1), (5)(B), (6)(B),

7862(d)(4), (5), (10), 7891(a)(1), (b)(1), (2), 7894(c)(3),

Dec. 19, 1989, 103 Stat. 2430, 2434, 2445, 2449; Pub.

L. 103–465, title VII, §767(c)(1), Dec. 8, 1994, 108

Stat. 5039; Pub. L. 104–188, title I, §1442(b), Aug.

20, 1996, 110 Stat. 1808; Pub. L. 105–34, title X,

§1071(b)(1), Aug. 5, 1997, 111 Stat. 948.)

AMENDMENTS

1997—Subsec. (e)(1). Pub. L. 105–34 substituted

‘‘$5,000’’ for ‘‘$3,500’’.

1996—Subsec. (a)(2). Pub. L. 104–188, §1442(b)(1), substituted ‘‘subparagraph (A) or (B)’’ for ‘‘subparagraph

(A), (B), or (C)’’ in introductory provisions.

Subsec. (a)(2)(C). Pub. L. 104–188, §1442(b)(2), struck

out subpar. (C) which read as follows: ‘‘A plan satisfies

the requirements of this subparagraph if—

‘‘(i) the plan is a multiemployer plan (within the

meaning of section 1002(37)), and

‘‘(ii) under the plan—

‘‘(I) an employee who is covered pursuant to a

collective bargaining agreement described in section 1002(37)(A)(ii) of this title and who has completed at least 10 years of service has a nonforfeitable right to 100 percent of the employee’s accrued

benefit derived from employer contributions, and

‘‘(II) the requirements of subparagraph (A) or (B)

are met with respect to employees not described in

subclause (I).’’

1994—Subsec. (e)(2). Pub. L. 103–465 amended par. (2)

generally. Prior to amendment, par. (2) read as follows:

‘‘(2)(A) For purposes of paragraph (1), the present

value shall be calculated—

‘‘(i) by using an interest rate no greater than the

applicable interest rate if the vested accrued benefit

(using such rate) is not in excess of $25,000, and

‘‘(ii) by using an interest rate no greater than 120

percent of the applicable interest rate if the vested

accrued benefit exceeds $25,000 (as determined under

clause (i)).

In no event shall the present value determined under

subclause (II) be less than $25,000.

‘‘(B) For purposes of subparagraph (A), the term ‘applicable interest rate’ means the interest rate which

would be used (as of the date of the distribution) by the

Pension Benefit Guaranty Corporation for purposes of

determining the present value of a lump sum distribution on plan termination.’’

1989—Subsec. (a)(2). Pub. L. 101–239, §7861(a)(1)(A),

substituted ‘‘satisfies the requirements’’ for ‘‘satisfies

the following requirements’’ in introductory provisions.

Subsec. (a)(2)(C)(ii)(I). Pub. L. 101–239, §7861(a)(1)(B),

substituted ‘‘section 1002(37)(A)(ii) of this title’’ for

‘‘section 414(f)(1)(B)’’.

Subsec. (a)(3)(D)(v). Pub. L. 101–239, §7894(c)(3), substituted ‘‘nonforfeitability’’ for ‘‘nonforfeitably’’.

Subsec. (a)(3)(F). Pub. L. 101–239, §7861(a)(5)(B), added

subpar. (F).

Subsec. (b)(1)(A). Pub. L. 101–239, §7861(a)(6)(B),

amended subpar. (A) generally. Prior to amendment,

subpar. (A) read as follows: ‘‘years of service before age

18, except that in case of a plan which does not satisfy

subparagraph (A) or (B) of subsection (a)(2) of this section, the plan may not disregard any such year of service during which the employee was a participant;’’.

Subsec. (c)(2). Pub. L. 101–239, §7891(a)(1), substituted

‘‘Internal Revenue Code of 1986’’ for ‘‘Internal Revenue

Code of 1954’’, which for purposes of codification was

translated as ‘‘title 26’’ thus requiring no change in

text.
§ 1053 TITLE 29—LABOR Page 386

Subsec. (e)(1). Pub. L. 101–239, §7862(d)(10), which directed amendment of par. (1) by substituting ‘‘nonforfeitable benefit’’ for ‘‘vested accrued benefit’’, could

not be executed because the language ‘‘vested accrued

benefit’’ did not appear after the amendment by Pub. L.

101–239, §7862(d)(5), see below.

Pub. L. 101–239, §7862(d)(5), amended par. (1) generally. Prior to amendment, par. (1) read as follows: ‘‘If

the present value of any vested accrued benefit exceeds

$3,500, a pension plan shall provide that such benefit

may not be immediately distributed without the consent of the participant.’’

Pub. L. 101–239, §7862(d)(4), made technical correction

to Pub. L. 99–514, §1898(d)(1)(B), see 1986 Amendment

note below.

Subsec. (e)(2). Pub. L. 101–239, §7891(b)(1), (2), realigned margins of subpars. (A) and (B) and struck out

subpar. (B) heading ‘‘Applicable interest rate’’.

Subsec. (e)(3). Pub. L. 101–239, §7891(a)(1), substituted

‘‘Internal Revenue Code of 1986’’ for ‘‘Internal Revenue

Code of 1954’’, which for purposes of codification was

translated as ‘‘title 26’’ thus requiring no change in

text.

1986—Subsec. (a)(2). Pub. L. 99–514, §1113(e)(1), amended par. (2) generally, substituting provisions covering 5-

year vesting, 3- to 7-year vesting, and multiemployer

plans, for former provisions which covered 10-year vesting, 5- to 15-year vesting, and the ‘‘rule of 45’’ under

which a plan satisfied the requirements of this paragraph if an employee who had completed at least 5

years of service and with respect to whom the sum of

his age and years of service equalled or exceeded 45 had

a right to a percentage of his accrued benefits derived

from employer contributions.

Subsec. (a)(3)(D)(ii). Pub. L. 99–514, §1898(a)(4)(B)(i),

inserted last sentence and struck out former last sentence which read as follows: ‘‘In the case of a defined

contribution plan the plan provision required under

this clause may provide that such repayment must be

made before the participant has any 1-year break in

service commencing after the withdrawal.’’

Subsec. (c)(1)(B). Pub. L. 99–514, §1113(e)(4)(A), substituted ‘‘3 years’’ for ‘‘5 years’’.

Subsec. (c)(3). Pub. L. 99–514, §1113(e)(2), struck out

par. (3) which provided for class year vesting.

Pub. L. 99–514, §1898(a)(1)(B), amended par. (3) generally. Prior to amendment, par. (3) read as follows: ‘‘The

requirements of subsection (a)(2) of this section shall

be deemed to be satisfied in the case of a class year

plan if such plan provides that 100 percent of each employee’s right to or derived from the contributions of

the employer on his behalf with respect to any plan

year are nonforfeitable not later than the end of the

5th year following the plan year for which such contributions were made. For purposes of this part, the

term ‘class year plan’ means a profit sharing, stock

bonus, or money purchase plan which provides for the

separate nonforfeitability of employees’ rights to or derived from the contributions for each plan year.’’

Subsec. (e)(1). Pub. L. 99–514, §1898(d)(1)(B), as amended by Pub. L. 101–239, §7862(d)(4), amended par. (1) generally. Prior to amendment, par. (1) read as follows: ‘‘If

the present value of any accrued benefit exceeds $3,500,

such benefit shall not be treated as nonforfeitable if the

plan provides that the present value of such benefit

could be immediately distributed without the consent

of the participant.’’

Subsec. (e)(2). Pub. L. 99–514, §1139(c)(1), amended par.

(2) generally. Prior to amendment, par. (2) read as follows: ‘‘For purposes of paragraph (1), the present value

shall be calculated by using an interest rate not greater than the interest rate which would be used (as of the

date of the distribution) by the Pension Benefit Guaranty Corporation for purposes of determining the

present value of a lump sum distribution on plan termination.’’

Pub. L. 99–514, §1898(d)(2)(B), added par. (3).

1984—Subsec. (b)(1)(A). Pub. L. 98–397, §102(b), substituted ‘‘18’’ for ‘‘22’’.

Subsec. (b)(3)(C). Pub. L. 98–397, §102(c), substituted

‘‘5 consecutive 1-year breaks in service’’ for ‘‘any 1-year

break in service’’ and substituted ‘‘such 5-year period’’

for ‘‘such break’’ in two places.

Subsec. (b)(3)(D). Pub. L. 98–397, §102(d)(2), amended

subpar. (D) generally. Prior to amendment, subpar. (D)

read as follows: ‘‘For purposes of paragraph (1), in the

case of a participant who, under the plan, does not have

any nonforfeitable right to an accrued benefit derived

from employer contributions, years of service before

any 1-year break in service shall not be required to be

taken into account if the number of consecutive 1-year

breaks in service equals or exceeds the aggregate number of such years of service prior to such break. Such

aggregate number of years of service before such break

shall be deemed not to include any years of service not

required to be taken into account under this subparagraph by reason of any prior break in service.’’

Subsec. (b)(3)(E). Pub. L. 98–397, §102(e)(2), added subpar. (E).

Subsec. (e). Pub. L. 98–397, §105(a), added subsec. (e).

1980—Subsec. (a)(3)(E). Pub. L. 96–364, §303(1), added

subpar. (E).

Subsec. (b)(1)(G). Pub. L. 96–364, §303(2)–(4), added subpar. (G).

EFFECTIVE DATE OF 1997 AMENDMENT

Amendment by Pub. L. 105–34 applicable to plan years

beginning after Aug. 5, 1997, see section 1071(c) of Pub.

L. 105–34, set out as a note under section 411 of Title 26,

Internal Revenue Code.

EFFECTIVE DATE OF 1996 AMENDMENT

Amendment by Pub. L. 104–188 applicable to plan

years beginning on or after the earlier of (1) the later

of (A) Jan. 1, 1997, or (B) the date on which the last of

the collective bargaining agreements pursuant to

which the plan is maintained terminates (determined

without regard to any extension thereof after Aug. 20,

1996), or (2) Jan. 1, 1999, but such amendment not applicable to any individual who does not have more than 1

hour of service under the plan on or after the 1st day

of the 1st plan year to which such amendment applies,

see section 1442(c) of Pub. L. 104–188, set out as a note

under section 411 of Title 26, Internal Revenue Code.

EFFECTIVE DATE OF 1994 AMENDMENT

Amendment by Pub. L. 103–465 applicable to plan

years and limitation years beginning after Dec. 31, 1994,

except that employer may elect to treat such amendment as effective on or after Dec. 8, 1994, with provisions relating to reduction of accrued benefits, exception, and timing of plan amendment, see section 767(d)

of Pub. L. 103–465, as amended, set out as a note under

section 411 of Title 26, Internal Revenue Code.

EFFECTIVE DATE OF 1989 AMENDMENT

Amendment by sections 7861(a)(1), (5)(B), (6)(B) and

7862(d)(4), (5), (10) of Pub. L. 101–239 effective as if included in the provision of the Tax Reform Act of 1986,

Pub. L. 99–514, to which such amendment relates, see

section 7863 of Pub. L. 101–239, set out as a note under

section 106 of Title 26, Internal Revenue Code.

Amendment by section 7891(a)(1), (b)(1), (2) of Pub. L.

101–239 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986,

Pub. L. 99–514, to which such amendment relates, see

section 7891(f) of Pub. L. 101–239, set out as a note under

section 1002 of this title.

Amendment by section 7894(c)(3) of Pub. L. 101–239 effective, except as otherwise provided, as if originally

included in the provision of the Employee Retirement

Income Security Act of 1974, Pub. L. 93–406, to which

such amendment relates, see section 7894(i) of Pub. L.

101–239, set out as a note under section 1002 of this title.

EFFECTIVE DATE OF 1986 AMENDMENT

Amendment by section 1113(e)(1), (2), (4)(A) of Pub. L.

99–514 applicable to plan years beginning after Dec. 31,

1988, with special rule for plans maintained pursuant to

collective bargaining agreements ratified before Mar. 1,
Page 387 TITLE 29—LABOR § 1054

1986, and not applicable to employees who do not have

1 hour of service in any plan year to which the amendment applies, see section 1113(f) of Pub. L. 99–514, as

amended, set out as a note under section 411 of Title 26,

Internal Revenue Code.

Amendment by section 1139(c)(1) of Pub. L. 99–514 applicable to distributions in plan years beginning after

Dec. 31, 1984, except that such amendments shall not

apply to any distributions in plan years beginning after

Dec. 31, 1984, and before Jan. 1, 1987, if such distributions were made in accordance with the requirements

of the regulations issued under the Retirement Equity

Act of 1984, Pub. L. 98–397, with additional provisions

relating to reductions in accrued benefits, see section

1139(d) of Pub. L. 99–514, set out as a note under section

411 of Title 26.

Amendment by section 1898(a)(1)(B) of Pub. L. 99–514

applicable to contributions made for plan years beginning after Oct. 22, 1986, except that in the case of a plan

described in section 302(b) of Pub. L. 98–397, set out as

a note under section 1001 of this title, such amendments shall not apply to any plan year to which

amendments made by Pub. L. 98–397 do not apply by

reason of such section 302(b), see section 1898(a)(1)(C) of

Pub. L. 99–514, set out as a note under section 411 of

Title 26.

Amendment by section 1898(a)(4)(B)(i), (d)(1)(B),

(2)(B), of Pub. L. 99–514 effective as if included in the

provision of the Retirement Equity Act of 1984, Pub. L.

98–397, to which such amendment relates, except as

otherwise provided, see section 1898(j) of Pub. L. 99–514,

set out as a note under section 401 of Title 26.

EFFECTIVE DATE OF 1984 AMENDMENT

Amendment by Pub. L. 98–397 applicable to plan years

beginning after Dec. 31, 1984, except as otherwise provided, see sections 302 and 303 of Pub. L. 98–397, set out

as a note under section 1001 of this title.

EFFECTIVE DATE OF 1980 AMENDMENT

Amendment by Pub. L. 96–364 effective Sept. 26, 1980,

except as specifically provided, see section 1461(e) of

this title.

REGULATIONS

Secretary of the Treasury or his delegate to issue before Feb. 1, 1988, final regulations to carry out amendments made by section 1113 of Pub. L. 99–514, see section 1141 of Pub. L. 99–514, set out as a note under section 401 of Title 26, Internal Revenue Code.

Secretary authorized, effective Sept. 2, 1974, to promulgate regulations wherever provisions of this subchapter call for the promulgation of regulations, see

section 1031 of this title.

PLAN AMENDMENTS NOT REQUIRED UNTIL

JANUARY 1, 1998

For provisions directing that if any amendments

made by subtitle D [§§1401–1465] of title I of Pub. L.

104–188 require an amendment to any plan or annuity

contract, such amendment shall not be required to be

made before the first day of the first plan year beginning on or after Jan. 1, 1998, see section 1465 of Pub. L.

104–188, set out as a note under section 401 of Title 26,

Internal Revenue Code.

PLAN AMENDMENTS NOT REQUIRED UNTIL

JANUARY 1, 1989

For provisions directing that if any amendments

made by subtitle A or subtitle C of title XI [§§1101–1147

and 1171–1177] or title XVIII [§§1800–1899A] of Pub. L.

99–514 require an amendment to any plan, such plan

amendment shall not be required to be made before the

first plan year beginning on or after Jan. 1, 1989, see

section 1140 of Pub. L. 99–514, as amended, set out as a

note under section 401 of Title 26, Internal Revenue

Code.

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 623, 1002, 1052,

1054, 1055, 1056, 1057, 1059, 1060, 1061, 1222, 1344, 1425, 1426,

1441 of this title; title 26 section 6057.

§ 1054. Benefit accrual requirements

(a) Satisfaction of requirements by pension plans

Each pension plan shall satisfy the requirements of subsection (b)(3) of this section, and—

(1) in the case of a defined benefit plan, shall

satisfy the requirements of subsection (b)(1) of

this section; and

(2) in the case of a defined contribution plan,

shall satisfy the requirements of subsection

(b)(2) of this section.

(b) Enumeration of plan requirements

(1)(A) 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 at the normal retirement age 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

331

⁄3) 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) A defined benefit plan satisfies the requirements of this paragraph of 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

1331

⁄3 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