29 U.S.C. § 1053 — Minimum vesting standards

Page 407 TITLE 29—LABOR § 1053 1989—Subsec. (a)(1)(B)(i). Pub. L. 101–239, § 7861(a)(2), made technical correction to directory language of Pub. L. 99–514. See 1986 Amendment note below. Subsec. (a)(1)(B)(ii). Pub. L. 101–239, § 7894(c)(2)(A), substituted ‘‘educational organization’’ for ‘‘edu- cational institution’’. Pub. L. 101–239, § 7891(a)(1), substituted ‘‘Internal Rev- enue 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), sub- stituted ‘‘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 regula- tions 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 re- tirement age under the plan.’’ 1984—Subsec. (a)(1). Pub. L. 98–397, § 102(a), sub- stituted ‘‘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 fol- lows: ‘‘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) if the number of consecutive 1-year breaks in service equals or exceeds the aggregate num- ber of such years of service before such break. Such ag- gregate 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). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2022 AMENDMENT Amendment by Pub. L. 117–328 applicable to plan years beginning after Dec. 31, 2024, see section 125(f)(1) of Pub. L. 117–328, set out as a note under section 401 of Title 26, Internal Revenue Code. EFFECTIVE DATE OF 1989 AMENDMENT Amendment by section 7861(a)(2) of Pub. L. 101–239 ef- fective as if included in the provision of the Tax Re- form Act of 1986, Pub. L. 99–514, to which such amend- ment 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 ef- fective, 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. Pub. L. 101–239, title VII, § 7892(c), Dec. 19, 1989, 103 Stat. 2447, 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 provi- sion 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 Reconcili- ation Act of 1987, Pub. L. 100–203] to which such amend- ment relates.’’ Amendment by section 7894(c)(2) of Pub. L. 101–239 ef- fective, 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 ap- plicable 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 ap- plies, 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 re- spect 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 Amend- ments 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 pro- vided, 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 pro- mulgate regulations wherever provisions of this sub- chapter 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. § 1053. Minimum vesting standards (a) Nonforfeitability requirements Each pension plan shall provide that an em- ployee’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 ac- crued benefit derived from his own contribu- tions are nonforfeitable. (2)(A)(i) In the case of a defined benefit plan, a plan satisfies the requirements of this para- Page 408 TITLE 29—LABOR § 1053 graph if it satisfies the requirements of clause (ii) or (iii). (ii) A plan satisfies the requirements of this clause 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. (iii) A plan satisfies the requirements of this clause if an employee has a nonforfeitable right to a percentage of the employee’s ac- crued benefit derived from employer contribu- tions determined under the following table: Years of service: The nonforfeitable percentage is: 3 .............................................. 20 4 .............................................. 40 5 .............................................. 60 6 .............................................. 80 7 or more ................................. 100. (B)(i) In the case of an individual account plan, a plan satisfies the requirements of this paragraph if it satisfies the requirements of clause (ii) or (iii). (ii) A plan satisfies the requirements of this clause if an employee who has completed at least 3 years of service has a nonforfeitable right to 100 percent of the employee’s accrued benefit derived from employer contributions. (iii) A plan satisfies the requirements of this clause if an employee has a nonforfeitable right to a percentage of the employee’s ac- crued benefit derived from employer contribu- tions determined under the following table: Years of service: The nonforfeitable percentage is: 2 .............................................. 20 3 .............................................. 40 4 .............................................. 60 5 .............................................. 80 6 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 partici- pant dies (except in the case of a survivor an- nuity 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 sus- pended for such period as the employee is em- ployed, subsequent to the commencement of payment of such benefits— (i) in the case of a plan other than a multi- employer plan, by an employer who main- tains 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 com- menced. 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 ‘‘em- ployed’’. (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 applica- tion as provided in section 1082(d)(2) 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 con- tributions (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 for- feited under a plan provision described in such clause shall be restored upon repayment by the participant of the full amount of the with- drawal 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 ap- plies) on the date of such repayment (com- puted annually from the date of such with- drawal). 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-em- ployed 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 ac- crued benefit derived from employer contribu- tions shall not be treated as forfeitable solely because the plan provides that an amount of such accrued benefit may be forfeited on ac- count 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 ac- crued benefit, see section 1056(c) of this title. (E)(i) A right to an accrued benefit derived from employer contributions under a multiem- Page 409 TITLE 29—LABOR § 1053 1 See References in Text note below. 2 So in original. The comma probably should be a semicolon. ployer plan shall not be treated as forfeitable solely because the plan provides that benefits accrued as a result of service with the partici- pant’s employer before the employer had an obligation to contribute under the plan may not be payable if the employer ceases con- tributions to the multiemployer plan. (ii) A participant’s right to an accrued ben- efit derived from employer contributions under a multiemployer plan shall not be treat- ed as forfeitable solely because— (I) the plan is amended to reduce benefits under section 1425 1 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 sec- tion 401(k)(8)(B) of title 26, an excess deferral under section 402(g)(2)(A) of title 26, an erro- neous automatic contribution under section 414(w) of title 26, or an excess aggregate con- tribution 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- forfeitable percentage under subsection (a)(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 fol- lowing may be disregarded: (A) years of service before age 18,2 (B) years of service during a period for which the employee declined to contribute to a plan requiring employee contributions,2 (C) years of service with an employer during any period for which the employer did not maintain the plan or a predecessor plan, de- fined by the Secretary of the Treasury; (D) service not required to be taken into ac- count 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 ap- plies 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 em- ployer from the plan (within the meaning of section 1383 of this title), or (II) to the extent permitted by regula- tions 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 sec- tion 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 Sec- retary 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 re- turn. (C) For purposes of paragraph (1), in the case of any participant in an individual account plan or an insured defined benefit plan which satis- fies 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 pe- riod shall not be required to be taken into ac- count for purposes of determining the non- forfeitable percentage of his accrued benefit de- rived from employer contributions which ac- crued 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 ac- count in applying clause (i) to a subsequent pe- riod of breaks in service. (iii) For purposes of clause (i), the term ‘‘non- vested participant’’ means a participant who does not have any nonforfeitable right under the plan to an accrued benefit derived from em- ployer contributions. (E)(i) In the case of each individual who is ab- sent from work for any period— (I) by reason of the pregnancy of the indi- vidual, (II) by reason of the birth of a child of the individual, Page 410 TITLE 29—LABOR § 1053 (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 para- graph whether a 1-year break in service has oc- curred, 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 in- dividual 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 of absence is treated as hours of service as pro- vided 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 computa- tions 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 rea- sonably 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) PART-TIME EMPLOYEES.—For purposes of de- termining whether an employee who became eli- gible to participate in a qualified cash or de- ferred arrangement or a salary reduction agree- ment under a plan solely by reason of section 1052(c)(1)(B) of this title has a nonforfeitable right to employer contributions— (A) except as provided in subparagraph (B), each 12-month period for which the employee has at least 500 hours of service shall be treat- ed as a year of service; and (B) paragraph (3) shall be applied by sub- stituting ‘‘at least 500 hours of service’’ for ‘‘more than 500 hours of service’’ in subpara- graph (A) thereof. For purposes of this paragraph, 12-month periods shall be determined in the same manner as under the last sentence of section 1052(a)(3)(A) of this title, except that 12-month periods begin- ning before January 1, 2023, shall not be taken into account. (5) Cross references (A) For definitions of ‘‘accrued benefit’’ and ‘‘nor- mal 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 the plan shall be treated as not satisfying the requirements of subsection (a)(2) if the nonforfeitable percentage of the accrued benefit derived from employer contributions (de- termined as of the later of the date such amend- ment is adopted, or the date such amendment becomes effective) of any employee who is a par- ticipant in the plan is less than such nonforfeit- able percentage computed under the plan with- out 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) unless each participant having not less than 3 years of service is permitted to elect, within a reasonable period after adoption of such amend- ment, to have his nonforfeitable percentage computed under the plan without regard to such amendment. (2) Subsection (a) shall not apply to benefits which may not be provided for designated em- ployees in the event of early termination of the plan under provisions of the plan adopted pursu- ant 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; cov- ered distributions (1) If the present value of any nonforfeitable benefit with respect to a participant in a plan exceeds $7,000, 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 sec- tion 1055(g)(3) of this title. (3) This subsection shall not apply to any dis- tribution of dividends to which section 404(k) of title 26 applies. (4) A plan shall not fail to meet the require- ments of this subsection if, under the terms of the plan, the present value of the nonforfeitable accrued benefit is determined without regard to that portion of such benefit which is attrib- utable to rollover contributions (and earnings allocable thereto). For purposes of this subpara- graph, the term ‘‘rollover contributions’’ means any rollover contribution under sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16) of title 26. (f) Special rules for plans computing accrued benefits by reference to hypothetical account balance or equivalent amounts (1) In general An applicable defined benefit plan shall not be treated as failing to meet— (A) subject to paragraph (2), the require- ments of subsection (a)(2), or (B) the requirements of section 1054(c) or 1055(g) of this title, or the requirements of Page 411 TITLE 29—LABOR § 1053 subsection (e), with respect to accrued bene- fits derived from employer contributions, solely because the present value of the accrued benefit (or any portion thereof) of any partici- pant is, under the terms of the plan, equal to the amount expressed as the balance in the hy- pothetical account described in paragraph (3) or as an accumulated percentage of the par- ticipant’s final average compensation. (2) 3-year vesting In the case of an applicable defined benefit plan, such plan shall be treated as meeting the requirements of subsection (a)(2) only if an employee who has completed at least 3 years of service has a nonforfeitable right to 100 per- cent of the employee’s accrued benefit derived from employer contributions. (3) Applicable defined benefit plan and related rules For purposes of this subsection— (A) In general The term ‘‘applicable defined benefit plan’’ means a defined benefit plan under which the accrued benefit (or any portion thereof) is calculated as the balance of a hypo- thetical account maintained for the partici- pant or as an accumulated percentage of the participant’s final average compensation. (B) Regulations to include similar plans The Secretary of the Treasury shall issue regulations which include in the definition of an applicable defined benefit plan any de- fined benefit plan (or any portion of such a plan) which has an effect similar to an appli- cable defined benefit plan. (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; Pub. L. 107–16, title VI, §§ 633(b), 648(a)(2), June 7, 2001, 115 Stat. 116, 127; Pub. L. 108–311, title IV, § 408(b)(8), Oct. 4, 2004, 118 Stat. 1193; Pub. L. 109–280, title I, § 108(a)(4), formerly § 107(a)(4), title VII, § 701(a)(2), title IX, §§ 902(d)(2)(E), 904(b), Aug. 17, 2006, 120 Stat. 819, 984, 1038, 1049, renumbered Pub. L. 111–192, title II, § 202(a), June 25, 2010, 124 Stat. 1297; Pub. L. 110–458, title I, § 107(a)(1), Dec. 23, 2008, 122 Stat. 5107; Pub. L. 117–328, div. T, title I, § 125(b), title III, § 304(a), Dec. 29, 2022, 136 Stat. 5315, 5341.) Editorial Notes REFERENCES IN TEXT Section 1425 of this title, referred to in subsec. (a)(3)(E)(ii)(I), was repealed by Pub. L. 113–235, div. O, title I, § 108(a)(1), Dec. 16, 2014, 128 Stat. 2786. AMENDMENTS 2022—Subsec. (b)(4), (5). Pub. L. 117–328, § 125(b), added par. (4) and redesignated former par. (4) as (5). Subsec. (e)(1). Pub. L. 117–328, § 304(a), substituted ‘‘$7,000’’ for ‘‘$5,000’’. 2008—Subsec. (f)(1)(B). Pub. L. 110–458 amended sub- par. (B) generally. Prior to amendment, subpar. (B) read as follows: ‘‘the requirements of section 1054(c) of this title or section 1055(g) of this title with respect to contributions other than employee contributions,’’. 2006—Subsec. (a)(2). Pub. L. 109–280, § 904(b)(1), amend- ed par. (2) generally, substituting provisions relating to satisfaction of requirements in the case of a defined benefit plan and in the case of an individual account plan for provisions relating to satisfaction of require- ments if an employee who has completed at least 5 years of service has a nonforfeitable right to 100 per- cent of the employee’s accrued benefit derived from employer contributions or if an employee has a non- forfeitable right to a percentage of such benefit based upon number of years of service. Subsec. (a)(3)(C). Pub. L. 109–280, § 108(a)(4), formerly § 107(a)(4), as renumbered by Pub. L. 111–192, substituted ‘‘1082(d)(2)’’ for ‘‘1082(c)(8)’’. Subsec. (a)(3)(F). Pub. L. 109–280, § 902(d)(2)(E), in- serted ‘‘an erroneous automatic contribution under sec- tion 414(w) of title 26,’’ before ‘‘or an excess aggregate contribution’’. Subsec. (a)(4). Pub. L. 109–280, § 904(b)(2), struck out par. (4), which related to application of par. (2) in the case of matching contributions, as defined in section 401(m)(4)(A) of title 26. Subsec. (f). Pub. L. 109–280, § 701(a)(2), added subsec. (f). 2004—Subsec. (a)(4)(B). Pub. L. 108–311 substituted ‘‘6 or more’’ for ‘‘6’’ in table. 2001—Subsec. (a)(2). Pub. L. 107–16, § 633(b)(1), sub- stituted ‘‘Except as provided in paragraph (4), a plan’’ for ‘‘A plan’’ in introductory provisions. Subsec. (a)(4). Pub. L. 107–16, § 633(b)(2), added par. (4). Subsec. (e)(4). Pub. L. 107–16, § 648(a)(2), added par. (4). 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), sub- stituted ‘‘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 sec- tion 1002(37)(A)(ii) of this title and who has com- pleted at least 10 years of service has a nonforfeit- able 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 ‘ap- plicable 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 distribu- tion on plan termination.’’ Page 412 TITLE 29—LABOR § 1053 1989—Subsec. (a)(2). Pub. L. 101–239, § 7861(a)(1)(A), substituted ‘‘satisfies the requirements’’ for ‘‘satisfies the following requirements’’ in introductory provi- sions. 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), sub- stituted ‘‘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), 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. Subsec. (e)(1). Pub. L. 101–239, § 7862(d)(10), which di- rected amendment of par. (1) by substituting ‘‘non- forfeitable 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) gen- erally. 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 con- sent 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), re- aligned 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), amend- ed par. (2) generally, substituting provisions covering 5- year vesting, 3- to 7-year vesting, and multiemployer plans, for former provisions which covered 10-year vest- ing, 5- to 15-year vesting, and the ‘‘rule of 45’’ under which a plan satisfied the requirements of this para- graph 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 sen- tence 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), sub- stituted ‘‘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) gen- erally. Prior to amendment, par. (3) read as follows: ‘‘The requirements of subsection (a)(2) 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 nonforfeit- able 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 contribu- tions for each plan year.’’ Subsec. (e)(1). Pub. L. 99–514, § 1898(d)(1)(B), as amend- ed by Pub. L. 101–239, § 7862(d)(4), amended par. (1) gen- erally. 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 fol- lows: ‘‘For purposes of paragraph (1), the present value shall be calculated by using an interest rate not great- er than the interest rate which would be used (as of the date of the distribution) by the Pension Benefit Guar- anty Corporation for purposes of determining the present value of a lump sum distribution on plan termi- nation.’’ Pub. L. 99–514, § 1898(d)(2)(B), added par. (3). 1984—Subsec. (b)(1)(A). Pub. L. 98–397, § 102(b), sub- stituted ‘‘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 num- ber 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 subpara- graph by reason of any prior break in service.’’ Subsec. (b)(3)(E). Pub. L. 98–397, § 102(e)(2), added sub- par. (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 sub- par. (G). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2022 AMENDMENT Amendment by section 125(b) of Pub. L. 117–328 appli- cable to plan years beginning after Dec. 31, 2024, see section 125(f)(1) of Pub. L. 117–328, set out as a note under section 401 of Title 26, Internal Revenue Code. Amendment by section 304(a) of Pub. L. 117–328 appli- cable to distributions made after Dec. 31, 2023, see sec- tion 304(b) of Pub. L. 117–328, set out as a note under section 401 of Title 26, Internal Revenue Code. EFFECTIVE DATE OF 2008 AMENDMENT Amendment by Pub. L. 110–458 effective as if included in the provisions of Pub. L. 109–280 to which the amend- ment relates, except as otherwise provided, see section 112 of Pub. L. 110–458, set out as a note under section 72 of Title 26, Internal Revenue Code. EFFECTIVE DATE OF 2006 AMENDMENT Amendment by section 108(a)(4) of Pub. L. 109–280 ap- plicable to plan years beginning after 2007, see section 108(e) of Pub. L. 109–280, set out as a note under section 1021 of this title. Amendment by section 701(a)(2) of Pub. L. 109–280 ap- plicable to periods beginning on or after June 29, 2005, and to distributions made after Aug. 17, 2006, with pro- visions relating to vesting and interest credit require- ments for plans in existence on June 29, 2005, special rule for collectively bargained plans, and provisions re- lating to conversions of plan amendments adopted Page 413 TITLE 29—LABOR § 1053 after, and taking effect after, June 29, 2005, see section 701(e) of Pub. L. 109–280, set out as a note under section 411 of Title 26, Internal Revenue Code. Amendment by section 902(d)(2)(E) of Pub. L. 109–280 applicable to plan years beginning after Dec. 31, 2007, see section 902(g) of Pub. L. 109–280, set out as a note under section 401 of Title 26, Internal Revenue Code. Amendment by section 904(b) of Pub. L. 109–280 appli- cable to contributions for plan years beginning after Dec. 31, 2006, with provisions relating to collective bar- gaining agreements and amount of service required in any plan year and special rule for stock ownership plans, see section 904(c) of Pub. L. 109–280, set out as a note under section 411 of Title 26, Internal Revenue Code. EFFECTIVE DATE OF 2001 AMENDMENT Amendment by section 633(b) of Pub. L. 107–16 appli- cable to contributions for plan years beginning after Dec. 31, 2001, with exception in the case of a plan main- tained pursuant to one or more collective bargaining agreements ratified by June 7, 2001, and service require- ment with respect to any plan, see section 633(c) of Pub. L. 107–16, set out as a note under section 411 of Title 26, Internal Revenue Code. Amendment by section 648(a)(2) of Pub. L. 107–16 ap- plicable to distributions after Dec. 31, 2001, see section 648(c) of Pub. L. 107–16, set out as a note under section 411 of Title 26, Internal Revenue Code. 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 appli- cable 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 amend- ment as effective on or after Dec. 8, 1994, with provi- sions relating to reduction of accrued benefits, excep- tion, 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 in- cluded 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 in- cluded 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 ef- fective, 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, 1986, and not applicable to employees who do not have 1 hour of service in any plan year to which the amend- ment 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 ap- plicable 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 distribu- tions 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 begin- ning 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 amend- ments 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 oth- erwise 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 pro- vided, 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 be- fore Feb. 1, 1988, final regulations to carry out amend- ments made by section 1113 of Pub. L. 99–514, see sec- tion 1141 of Pub. L. 99–514, set out as a note under sec- tion 401 of Title 26, Internal Revenue Code. Secretary authorized, effective Sept. 2, 1974, to pro- mulgate regulations wherever provisions of this sub- chapter call for the promulgation of regulations, see section 1031 of this title. APPLICABILITY OF AMENDMENTS BY SUBTITLES A AND B OF TITLE I OF PUB. L. 109–280 For special rules on applicability of amendments by subtitles A (§§ 101–108) and B (§§ 111–116) of title I of Pub. L. 109–280 to certain eligible cooperative plans, PBGC settlement plans, and eligible government contractor plans, see sections 104, 105, and 106 of Pub. L. 109–280, set out as notes under section 401 of Title 26, Internal Revenue Code. 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 begin- ning on or after Jan. 1, 1998, see section 1465 of Pub. L. Page 414 TITLE 29—LABOR § 1054 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. § 1054. Benefit accrual requirements (a) Satisfaction of requirements by pension plans Each pension plan shall satisfy the require- ments of subsection (b)(3), and— (1) in the case of a defined benefit plan, shall satisfy the requirements of subsection (b)(1); and (2) in the case of a defined contribution plan, shall satisfy the requirements of subsection (b)(2). (b) Enumeration of plan requirements (1)(A) A defined benefit plan satisfies the re- quirements of this paragraph if the accrued ben- efit to which each participant is entitled upon his separation from the service is not less than— (i) 3 percent of the normal retirement ben- efit to which he would be entitled at the nor- mal retirement age if he commenced partici- pation 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 bene- fits based on compensation during any period, the normal retirement benefit to which a partic- ipant would be entitled shall be determined as if he continued to earn annually the average rate of compensation which he earned during con- secutive 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 require- ments of this paragraph of a particular plan year if under the plan the accrued benefit pay- able 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 sub- paragraph— (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 dis- regarded; (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 rel- evant factors used to compute benefits shall be treated as remaining constant as of the cur- rent year for all years after the current year. (C) A defined benefit plan satisfies the require- ments of this paragraph if the accrued benefit to which any participant is entitled upon his sepa- ration from the service is not less than a frac- tion of the annual benefit commencing at nor- mal retirement age to which he would be enti- tled under the plan as in effect on the date of his separation if he continued to earn annually until normal retirement age the same rate of compensation upon which his normal retirement benefit would be computed under the plan, de- termined as if he had attained normal retire- ment age on the date any such determination is made (but taking into account no more than the 10 years of service immediately preceding his separation from service). Such fraction shall be a fraction, not exceeding 1, the numerator of which is the total number of his years of partici- pation in the plan (as of the date of his separa- tion from the service) and the denominator of which is the total number of years he would have participated in the plan if he separated from the service at the normal retirement age. For purposes of this subparagraph, social secu- rity benefits and all other relevant factors used to compute benefits shall be treated as remain- ing constant as of the current year for all years after such current year. (D) Subparagraphs (A), (B), and (C) shall not apply with respect to years of participation be- fore the first plan year to which this section ap- plies but a defined benefit plan satisfies the re- quirements 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 great- er 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 sub- paragraph (A), (B), or (C) applied with respect to such years of participation. (E) Notwithstanding subparagraphs (A), (B), and (C) of this paragraph, a plan shall not be treated as not satisfying the requirements of this paragraph solely because the accrual of ben- efits under the plan does not become effective until the employee has two continuous years of service. For purposes of this subparagraph, the term ‘‘year of service’’ has the meaning provided by section 1052(a)(3)(A) of this title. (F) Notwithstanding subparagraphs (A), (B), and (C), a defined benefit plan satisfies the re- quirements of this paragraph if such plan (i) is funded exclusively by the purchase of insurance contracts, and