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VACATION BENEFITS
* Contribution by employer of value of employee's unused vacation time, at employee's election, was not cash or deferred arrangement (CODA), (Ch1A/Def-CashOrDeferredArrangement/PtE.1.)
* Deferral of compensation attributable to paid time off (PTO) plans, see PTO PLANS
VALUATION
* Allocation of earnings under a defined contribution plans, (Ch3A/SecII/PtM)
* Annual valuation of defined contribution plan required at minimum, (Ch3A/SecII/PtM)
* Earnings in defined contribution plan: allocation to account balances, see ACCRUAL OF BENEFITS
VCGROUP PROCEDURE FOR RESOLVING QUALIFICATION FAILURES, see PLAN DISQUALIFICATION
VCO PROCEDURE FOR RESOLVING QUALIFICATION FAILURES, see PLAN DISQUALIFICATION
VESTING RULES
* Accrual requirements for defined benefit plans (IRC §411(b)), see ACCRUAL OF BENEFITS
* Acquired employees: crediting service with former employer, (Ch4/SecIV/PtF.2.)
* Amending the vesting schedule, see Vesting schedules below
* Anti-cutback rule protecting accrued benefits and optional forms of benefit (IRC §411(d)(6)): interaction with vesting requirements, (Ch4/SecIII/PtF.2.d.), (Ch4/SecIII/PtF.1.d.) Also see ANTI-CUTBACK RULE
* Break in service
- Definition, (Ch1B/Def-PreApprovedPlan)
- Elapsed time method, (Ch2/SecV/PtB.2.d.)
- Five-year break in service rule, (Ch4/SecVI/PtA.1.)
◆ Breaks must be consecutive, (Ch4/SecVI/PtA.1.a.)
◆ Defined benefit plans cannot use this rule except for fully-insured plans, (Ch4/SecVI/PtA.1.d.)
◆ Forfeiture triggered at end of 5-year break period, (Ch4/SecVI/PtA.1.b.2))
- FMLA leave, (Ch4/SecV/PtB.1.b.)
- Maternity/paternity leave rule, (Ch2/SecV/PtB.1.a.)
- Measuring the break in service, (Ch2/SecV/PtB.2.)
- One-year break in service rule (postponing credit for prior service), (Ch4/SecV/PtC.1.)
◆ Measuring additional year of service, (Ch4/SecV/PtC.1.a.)
◆ Temporary disregarding of service until additional year completed, (Ch4/SecV/PtC.1.)
◆ Vesting of accrued benefits before break not affected, (Ch4/SecV/PtC.1.f.)
- Operation of break in service rules, (Ch4/SecV/PtC)
- Rule of parity, (Ch2/SecV/PtC.2.)
- Termination of employment not necessary to incur break in service, (Ch4/SecV/PtB.2.c.)
* Cash-out distribution
- Basis for tax purposes generated from repayment of cash-out distribution, (Ch7/SecIII/PtC.3.)
- Consent requirements, (Ch4/SecVI/PtA.2.a.2))
- "Deemed" cash-outs of zero percent vested participants, (Ch4/SecVI/PtA.2.c.)
- Distribution must be "due to" employee's termination of participation in plan/"second plan year" rule, (Ch4/SecVI/PtA.2.a.6)b))
- Elective deferrals: treatment under cash-out rules, (Ch4/SecVI/PtA.2.f.)
- Forfeiture triggered by cash-out distribution, (Ch4/SecVI/PtA.2.a.4))
- Optional forms of benefit must be restored if repayment made, (Ch4/SecVI/PtA.2.d.)
- Repayment of cash-out distribution, (Ch4/SecVI/PtA.2.b.)
◆ Defined benefit plan, (Ch4/SecVI/PtA.2.b.2))
◆ Defined contribution plan, (Ch4/SecVI/PtA.2.b.)
- Requirements for cash-out distribution, (Ch4/SecVI/PtA.2.a.2))
- Section 415 limits: treatment of cash-out repayments, (Ch6/SecII/PtA.1.a.1))
- Vesting rights already established not affected by cash-out forfeiture, (Ch4/SecVI/PtA.2.d.)
- When is distribution "on account of" termination of participation, (Ch4/SecVI/PtA.2.a.4))
- Zero percent vested participant may be cashed-out through a "deemed" cash-out distribution, (Ch4/SecVI/PtA.2.c.)
* Church plans exempt from vesting rules if they are nonelecting church plans, (Ch4/SecXIII)
* Complete discontinuance of profit sharing contributions, see Plan termination below
* Consent requirements for certain distributions (IRC §411(a)(11)), see DISTRIBUTIONS
* Davis-Bacon contributions might have separate vesting schedule, (Ch4/SecIII/PtE.2.c.2))
* Death of participant might result in forfeiture, see Forfeiture below
* Deemed IRA accounts must be 100% vested at all times, (Ch4/SecIII/PtA.5.b.5))
* Defined benefit plans: vesting requirements, (Ch4/SecIII/PtA.1.)
* Defined contribution plans: vesting requirements, (Ch4/SecIII/PtA.2.)
* Discontinuance of profit sharing contributions, see Plan termination below
* Distributions
- Cash-out distribution, see Forfeiture below
- Special vesting formulas required if cash-out not used, (Ch4/SecIII/PtA.6.)
* Early retirement provision might be vesting event, (Ch6/SecIV/Pt.C.7.a.1))
* Elapsed time method of determining vesting, (Ch4/SecIV/PtD), (Ch2/SecV/PtB.2.d.), (Ch4/SecIV/PtD)
- Some absences treated as periods of service ("service spanning rule"), (Ch4/SecIV/PtD.2.b.)
* Elective deferrals, see SECTION 401(k) PLANS below
* Eligibility service separately determined from vesting service, (Ch4/SecIV/PtG)
* Employee contributions must be vested at all times, (Ch4/SecIII/PtA.5.b.)
- Determining employee-derived benefit under defined benefit plan, (Ch4/SecIX/PtB.2.)
- Determining employee-derived benefit under defined contribution plan, (Ch4/SecIX/PtB.1.)
* ESOPs
- ESOP dividends reinvested by employee election must be 100% vested, (Ch4/SecIII/PtA.5.b.6))
* Exclusion of certain service for vesting purposes, (Ch4/SecIV/PtE.2.)
- Age 18: exclusion of service earned before age 18, (Ch4/SecIV/PtE.2.b.)
- All service counts as general rule, (Ch4/SecIV/PtE)
- Break in service rules, service excluded under, see Break in service above
- Contributory plan: service excluded for period employee fails to contribute, (Ch4/SecIV/PtE.2.d.)
◆ Section 401(k) plans are not contributory plans for purposes of this rule, (Ch4/SecIV/PtE.2.d.3))
- Predecessor plan: service earned under predecessor plan may not be excluded, (Ch4/SecIV/PtE.2.a.)
- Service before the effective date of the plan may be disregarded, (Ch4/SecIV/PtE.2.a.)
◆ Service earned while predecessor plan maintained can't be disregarded, (Ch4/SecIV/PtE.2.a.)
* Exemption from vesting rules for certain plans, (Ch4/SecXIII)
* FMLA leave, see Break in service above
* Forfeitures
- Allocation of under defined contribution plan, see ACCRUAL OF BENEFITS
- Cash-out distribution triggers forfeiture, see Cash-out distribution above
- Death of participant may result in forfeiture, (Ch4/SecVI/PtB.1.)
- Defined benefit plans: treatment of forfeitures, see ACCRUAL OF BENEFITS
- Definition of forfeiture, (Ch1A/Def-Forfeiture)
- Excess vesting may be forfeited, (Ch4/SecVI/PtB.3.)
- Expenses of plan paid with forfeitures, (Ch3A/SecII/PtL.3.)
- Five-year break in service rule creates a forfeiture event, (Ch4/SecVI/PtA.1.)
- Forfeiture for cause, (Ch4/SecVI/PtB.3.)
- Improper forfeitures: correction methods, (Ch15/SecVI/PtC.9)
- Lost or missing participants/beneficiaries: might forfeit benefits, (Ch4/SecVI/PtB.5.)
◆ Effect of termination on conditional forfeiture (PBGC position), (Ch4/SecVI/PtB.5.b.3))
◆ Termination of plan before participant is determined to be missing, (Ch4/SecVI/PtB.5.b.)
- Matching contributions: forfeiture of match under certain circumstances, (Ch4/SecVI/PtB.2.) Also see SECTION 401(m) PLANS
- Multiemployer plans: special forfeiture rules, (Ch4/SecVI/PtB.9.)
- Permissible withdrawals (IRC §414(w)) from an eligible automatic contribution arrangement: forfeiture of related match, (Ch6/SecIV/Pt.C.6.d.)
- Reduction of benefits to satisfy nondiscrimination requirements under defined benefit plan, (Ch4/SecVI/PtB.9.)
- Retroactive amendment to reduce pension obligation because of business hardship, (Ch4/SecVI/PtB.3.)
- Suspension of benefits rule under defined benefit plan forfeits right to value of missed payments, (Ch4/SecVI/PtB.6.)
◆ Addition or modification of suspension of benefit rule (Central Laborers' case), (Ch6/SecIII/Pt.D.9.a.)
◆ Not applicable to actuarial increases required under IRC §401(a)(9)(C), (Ch4/SecVI/PtB.6.)
- Withdrawal of mandatory contributions may result in forfeiture under certain circumstances, (Ch4/SecVI/PtB.9.)
- Zero percent vested participant may be cashed-out, (Ch4/SecVI/PtA.2.c.)
* Forfeiture for cause, see Forfeiture above
* Governmental plans exempt from vesting rules, (Ch4/SecXIII)
* "Grossed up" vesting, see Special vesting formulas below
* Hypothetical vesting formulas, see Special vesting formulas below
* Leased employees: crediting vesting service, (Ch4/SecIV/PtF.3.)
* Lost or missing participants/beneficiaries, see Forfeiture above
* Mandatory contributions: withdrawal might affect vesting rights, see Forfeiture above
* Matching contributions: top heavy vesting rules apply to matching contributions, even if plan is not top heavy, (Ch4/SecIII/PtA.2.d.)
- May apply accelerated vesting to pre-2002 matching contributions, too, (Ch4/SecIII/PtA.2.d.)
* Maternity/paternity leave rule, see Break in service above
* Merger of plans
- Amendment to vesting schedule issues, (Ch4/SecIII/PtF.2.h.)
* Military service: crediting vesting service for period of absence, (Ch4/SecV/PtD.1.)
* Multiemployer plans
- Forfeitures: special rules relating to multiemployer plans, (Ch4/SecVI/PtB.9.)
* Multiple employer plans
- Participating employers treated as single employer for vesting purposes, (Ch4/SecIV/PtF.4.)
* Nondiscrimination issues relating to vesting schedule, (Ch3A/SecIII/PtA.1.c.)
* Nonelecting church plan exempt from vesting rules, (Ch4/SecXIII)
* Nonforfeitable, see Vested below
* Normal retirement age: definition, (Ch1B/Def-NormalRetirementAge)
* Normal retirement age: full vesting required, (Ch4/SecIII/PtA.5.a.)
- Accrual of benefits after attaining normal retirement age, see ACCRUAL OF BENEFITS
* Optional forms of benefit must be protected, see ANTI-CUTBACK RULE
* Partial termination
- Acquisition of employees, (Ch4/SecXII/PtB.1.e.)
- Affected employees in a partial termination situation, (Ch4/SecXII/PtB.1.a.8))
- Amendment to plan may trigger partial termination ("horizontal" partial termination), (Ch4/SecXII/PtB.2.)
- Constructive discharge: effect on partial termination determination, (Ch4/SecXII/PtB.1.b.4))
- Conversion of plan into another type of plan, (Ch4/SecXII/PtB.2.c.)
◆ Conversion of money purchase plan into profit sharing plan: no vesting required on MP accounts, (Ch4/SecXII/PtB.2.c.)
- Definition of partial termination, (Ch4/SecXII/PtB)
- Determination letter may be requested on whether there is a partial termination, (Ch4/SecXII/PtB.4.)
- Employer-initiated action required to create a partial termination, (Ch4/SecXII/PtB.1.a.4))
- Freezing accruals, (Ch4/SecXII/PtB.2.d.), (Ch4/SecXII/PtB.2.d.)
◆ Complete discontinuance of profit sharing plan contributions treated as a termination, (Ch4/SecXII/PtA.4.)
◆ Freezing a defined benefit plan, (Ch4/SecXII/PtB.2.d.)
◆ Freezing a money purchase plan, (Ch4/SecXII/PtB.2.d.)
- Funding status of defined benefit plan is relevant, (Ch4/SecXII/PtB.1.c.)
- Horizontal partial termination, (Ch4/SecXII/PtB.2.)
- Involuntary employment terminations required to result in partial termination, (Ch4/SecXII/PtB.1.a.4))
- Merger of plans, (Ch3B/SecX/PtD.2.g.)
◆ Merger of money purchase plan into profit sharing plan: no vesting required on MP accounts, (Ch4/SecXII/PtB.3.a.)
- No corresponding ERISA requirement, (Ch4/SecXII/PtC)
- Period of time for measuring whether a partial termination has occurred, (Ch4/SecXII/PtB.1.a.2))
- Potential for discrimination due to plan amendment may cause partial termination, (Ch4/SecXII/PtB.2.b.)
- Potential for reversion due to plan amendment may result in partial termination, (Ch4/SecXII/PtB.2.a.)
- Rebuttable presumption of partial termination if at least 20% turnover by employer-initiated action, (Ch4/SecXII/PtB.1.a.)
- Reduction of money purchase contribution formula, (Ch4/SecXII/PtB.2.d.)
- Retroactive finding by IRS that partial termination had occurred, (Ch4/SecXII/PtB.5.)
- Significant reduction in participation results in partial termination, (Ch4/SecXII/PtB.1.)
◆ Small plans at a disadvantage, (Ch4/SecXII/PtB.1.a.7))
◆ Terminations of vested participants, as well as nonvested participants, taken into account, (Ch4/SecXII/PtB.1.a.3))
◆ Turnover of less than 20%, (Ch4/SecXII/PtB.1.a.6))
- Vesting required for employees "affected" by the partial termination, (Ch4/SecXII/PtB)
* Plan termination results in 100% vesting, (Ch4/SecXII/PtA)
- "Affected" employees, (Ch4/SecXII/PtA.1.a.) (DC plans), (Ch4/SecXII/PtA2.a.) (DB plans)
- Discontinuance of profit sharing contributions, (Ch4/SecXII/PtA.4.)
◆ Discontinuance of contributions under money purchase plan not treated as termination, (Ch4/SecXII/PtB.2.d.)
◆ Treatment of 401(k) deferrals when determining whether a discontinuance of contributions has occurred, (Ch4/SecXII/PtA.4.b.)
- No corresponding ERISA requirement, (Ch4/SecXII/PtC)
- Suspension of contributions under profit sharing plan, (Ch4/SecXII/PtA.4.)
◆ Lack of profits valid reason for suspending contributions, (Ch4/SecXII/PtA.4.)
- Termination of plan coincident with liquidation of plan sponsor might not trigger vesting for former employees, (Ch4/SecXII/PtA.1.e.)
- When is a plan considered terminated? (Ch4/SecXII/PtA.3.)
* Predecessor plan: service earned under predecessor plan must be credited, (Ch4/SecIV/PtE.2.a.)
- SEP and SIMPLE-IRA plans not predecessor plans, (Ch4/SecIV/PtE.2.a.4))
* Prior employer: service with prior employer must be credited under certain circumstances, (Ch4/SecIV/PtF.2.)
* Profit sharing plan: complete discontinuance of contributions results in vesting, see Plan termination above
* QSLOB designation does not affect vesting service credits, (Ch4/SecIV/PtF.1.d.)
* Re-employment
- Prior service may be disregarded under break in service rules, see Break in service above
* Related employer: service credited as if related group were one employer, (Ch4/SecIV/PtF.1.)
- QSLOB designation does not affect service credits, (Ch4/SecIV/PtF.1.d.)
* Section 401(k) plans
- Cash-out rules: treatment of elective deferrals, (Ch4/SecVI/PtA.2.f.)
- Exception that allows no crediting of service in years employee fails to contribute not applicable to 401(k) plan, (Ch4/SecIV/PtE.2.d.3))
- Elective deferrals must be vested at all times, (Ch4/SecIII/PtA.5.b.1))
- Rule of parity: treatment of elective deferrals, (Ch4/SecV/PtC.2.c.1))
- Safe harbor 401(k) plans: vesting requirements, (Ch4/SecIII/PtA.5.b.4)), (Ch11/SecXIV/PtC)
- Vesting rules applied separately to non-401(k) employer contributions in pre-2006 years, (Ch4/SecIX/PtB.1.a.1))
◆ Regulations effective in 2006 require vesting rules (other than vesting schedules) to apply to account as a whole, (Ch4/SecVI/PtA.2.f.), (Ch4/SecVI/PtA.2.f.)
* Section 403(b) plans: nonforfeitability requirement for annuity contract/custodial account, (Ch16/SecII/PtD)
* Special vesting formulas required if distribution (other than cash-out) made before 5th break, (Ch4/SecIII/PtA.6.)
- Circumstances under which use of these formulas might arise, (Ch4/SecIII/PtA.6.e.)
- Defined benefit plans not subject to this rule, (Ch4/SecIII/PtA.6.f.)
- Examples illustrate differences between the two regulatory formulas, (Ch4/SecIII/PtA.6.c.)
* Suspension of benefits rule under defined benefit plan, see Forfeiture above
* Termination of employment
- Not forfeiture event, (Ch4/SecV/PtA.2.)
- Vesting determined at termination, (Ch4/SecV/PtA.1.)
* Title I of ERISA minimum vesting standards, (Ch13A/SecVII)
* Top heavy plans: special vesting schedules, see Vesting schedules below
* Two-year eligibility plan must provide 100% vesting, (Ch4/SecIII/PtC)
* Uniformed Services Employment and Reemployment Rights Act of 1994, see Military service above
* "Vested" defined, (Ch1B/Def-Vesting), (Ch4/SecII/PtA)
* Vesting computation period, see Year of service for vesting purposes below
* Vesting schedules, (Ch4/SecIII/PtA)
- Alternatives to statutory schedules (more liberal rules permitted), (Ch4/SecIII/PtD)
- Amending the vesting schedule, (Ch4/SecIII/PtF)
◆ Central Laborers' case from Supreme Court: regulations interpret application of case to amendments to vesting rights, (Ch4/SecIII/PtF.2.d.), (Ch6/SecIII/Pt.D.9.a.)
◆ Definition of amendment to vesting schedule, (Ch4/SecIII/PtF.3.)
◆ Election to stay on old schedule, (Ch4/SecIII/PtF.3.)
. . . Election period, (Ch4/SecIII/PtF.2.a.)
. . . Exception if new schedule better at all points, (Ch4/SecIII/PtF.2.c.)
. . . Three years of service required to get election rights, (Ch4/SecIII/PtF.3.)
. . . What if old schedule was better? (Ch4/SecIII/PtF.2.g.)
◆ Elective transfers between DC plans due to business transaction or employment status change, (Ch4/SecIII/PtF.2.j.)
◆ Merger transactions, (Ch4/SecIII/PtF.2.h.)
◆ Normal retirement age increase due to law change not treated as amendment to vesting schedule, (Ch4/SecIII/PtF.3.d.)
◆ One hour of service credited after new schedule becomes effective, (Ch4/SecIII/PtF.3.)
◆ Regulations require protection of future increases under old schedule with respect to accrued benefits, (Ch4/SecIII/PtF.2.d.)
◆ Protection of vesting percentage, (Ch4/SecIII/PtF.1.)
. . . ERISA Conference Report explanation, (Ch4/SecIII/PtF.1.b.)
. . . IRS interpretation, (Ch4/SecIII/PtF.1.a.)
◆ Separate vesting schedules for different contribution sources, (Ch4/SecIII/PtF.2.i.)
◆ Shift to or from top heavy schedule treated as amendment, (Ch4/SecIII/PtF.3.)
◆ Statutory changes that require amendments to plan's vesting schedule, (Ch4/SecIII/PtF.2.k.)
- Application of vesting percentage to accrued benefits, (Ch4/SecIII/PtE)
- Defined benefit plans: statutory schedules, (Ch4/SecIII/PtA.1.)
◆ Cash balance plans and other statutory hybrid plans are subject to 3-year vesting schedule, (Ch4/SecIII/PtA.1.d.1))
. . . Effective date rule for plans in existence on June 29, 2005, (Ch4/SecIII/PtA.1.d2))
◆ Eligible combined plans ("DB-K"): DB component requires full vesting within 3 years, (Ch1B/Def-Year Of Participation), 4.8
◆ Five-year cliff vesting, (Ch4/SecIII/PtA.1.a.)
◆ Multiemployer plans: special vesting rule, (Ch4/SecIII/PtA.6.g.)
◆ Seven-year graded, (Ch4/SecIII/PtA.1.b.)
◆ Top heavy defined benefit plans subject to accelerated vesting, (Ch4/SecIII/PtA.1.c.)
- Defined contribution plans: statutory schedules, (Ch4/SecIII/PtA.2.)
◆ Defined contribution plans subject to top heavy vesting, regardless of top heavy status due to PPA 2006, (Ch4/SecIII/PtA.2.)
. . . Applied to matching contributions after 2001, (Ch4/SecIII/PtA.2.d.)
. . . Pre-2007 nonelective contributions may be subject to non-top-heavy schedules, (Ch4/SecIII/PtA.2.c.)
. . . Pre-2002 matching contributions may be subject to non-top-heavy schedules, (Ch4/SecIII/PtA.2.d.)
◆ Shift to or from top heavy schedule, (Ch4/SecIII/PtF.3.)
◆ Six-year graded, (Ch4/SecIII/PtA.2.b.)
◆ Three-year cliff, (Ch4/SecIII/PtA.2.a.)
- Special vesting formulas required if distribution (other than cash-out) made before 5th break, (Ch4/SecIII/PtA.6.)
- Top heavy plans: statutory schedules, (Ch4/SecIII/PtA.3.)
◆ Defined contribution plans subject to top heavy vesting in post-2006 years, regardless of top heavy status, (Ch4/SecIII/PtA.2.)
. . . Applied to matching contributions after 2001, (Ch4/SecIII/PtA.2.d.)
◆ Not an ERISA requirement to provide top heavy vesting, (Ch4/SecIII/PtA.3.c.)
◆ Shift to or from top heavy schedule, (Ch4/SecIII/PtF.3.)
. . . Applies to employee with at least one hour of service after shift is effective, (Ch4/SecIII/PtF.3.)
◆ Six-year graded, (Ch4/SecIII/PtA.2.b.), (Ch4/SecIII/PtA.3.)
◆ Three-year cliff, (Ch4/SecIII/PtA.2.a.), (Ch4/SecIII/PtA.3.)
* Year of service for vesting purposes
- Break in service: measuring year of service following a break in service period, (Ch4/SecV/PtC.1.a.)
- Continuous employment not required, (Ch4/SecIV/PtC)
- Definition of year of service, (Ch1B/Def-YearOfService)
- Elapsed time method of crediting, (Ch4/SecIV/PtD)
- Service that may be excluded, see Exclusion of certain service for vesting purposes above
- Vesting computation period to measure year of service, (Ch4/SecIV/PtB)
◆ Amendment of vesting computation period, (Ch4/SecIIV/PtB.5.)
◆ Initial short year, (Ch4/SecIIV/PtB.5.)
VOLUNTARY COMPLIANCE RESOLUTION (VCR) PROGRAM, see PLAN DISQUALIFICATION
VOLUNTARY FIDUCIARY CORRECTION (VFC) PROGRAM
* Application procedures, (Ch13B/SecVI/PtC.3.)
- Checklist, (Ch13B/SecVI/PtC.3.)
* Cannot be under investigation, (Ch13B/SecVI/PtC.2.a.)
* Conditions for relief, (Ch13B/SecVI/PtC.1.)
* Corrective action, (Ch13B/SecVI/PtC.3.)
* Correction amount defined, (Ch13B/SecVI/PtC.6.a.)
* Eligibility requirements, (Ch13B/SecVI/PtC.2.)
* ERISA §502(l) penalty relieved, (Ch13B/SecVI/PtC.3.)
* Explanation of program, (Ch13B/SecVI/PtC)
* Fiduciary breaches covered by the program, (Ch13B/SecVI/PtC.4.)
- Table summarizing eligible transactions and corrective actions, (Ch13B/AppD)
* Mailing address for applications, (Ch13B/SecVI/PtC.3.h.)
* Scope of relief, (Ch13B/SecVI/PtC.3.)
* Waiver of excise taxes if certain prohibited transactions are corrected through VFC Program, (Ch13B/SecII/PtB.1.b.4)a)i)), (Ch13B/SecVI/PtC.4.a.2)), (Ch14/SecV/PtF)