1. Professor Kathryn Kennedy Chapter Five/Week Five

2. While ERISA and the Codes rules require a participant to accrue a benefit, vesting refers to whether the participant is entitled to all or a portion of that benefit upon early termination. Full vesting is required as of normal retirement age. A participant is always 100% in his/her own contribution; but allocations/accruals attributable to a vesting schedule can be forfeited

3. TRA 86 reduced the permissible vesting schedule to a 5-year cliff or 3-to-7 year graded schedule Top heavy plan must reduce the permissible schedule to a 3-year cliff or 2-to-6 year graded schedule EGTRRA 01 further reduced the permissible schedule for ER matching contributions to a 3- year cliff or 2-to-6 year graded schedule PPA 06 further reduced the permissible schedule for defined contribution plans to a 3-year cliff or 2-to-6 year graded schedule

4. Unlike years of service for eligibility, the plan may use the PY as the basis for vesting years 1,000 hours or more of service must equal a vesting year Certain years of service may be excluded Break in service rules may be applied to forfeit pre-break years of service

5. Optional on the part of the employer If there is a sufficient break, pre-break service may be lost Break in service = less than 501 hours within the vesting year Exceptions: maternity/paternity leave and military leave

6. Rule of Parity: the participant must be 0% vested as of the time of the break + 5 years of break One-Year hold out: if the participant incurs a break, he/she must complete one year of return upon return

7. Death before retirement Suspension of benefits upon reemployment Retroactive amendments Withdrawal of mandatory contributions Lost beneficiary Limitations on the 25-highest paid Forfeitures for cause

8. Qualified defined benefit plans must use forfeitures to reduce future employer contributions Qualified defined contribution plans have the option of using forfeitures to reduce future employer contributions or to reallocation them to existing participants Question arises: when does a forfeiture actually occur?

9. For defined contribution plans, a forfeitable event occurs upon the occurrence of 5 consecutive one-years breaks in service For defined benefit plans, a forfeitable events occurs upon the application of the Rule of Parity In the event of a cash-out of benefits upon break, the rule varies depending if the cash- out is voluntary or involuntary

10. ERISA §204(g) and IRC §411(d)(6) prohibit a retroactive reduction (cutback) in the participants AB through a plan amendment This includes elimination/reduction of early retirement benefits or optional forms of benefit payment