68A Stat. 3. 26 USC 1 et seq. 26 USC 401. Post, p. 901. 26 USC 170. 26 USC 501. TITLE II-AMENDMENTS TO THE INTER- SEC. 1001. AMENDMENT OF INTERNAL REVENUE CODE OF 1954. Except as otherwise expressly provided, whenever in this title an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1954. Subtitle A-Participation, Vesting, Funding, PART 1-PARTICIPATION, VESTING, AND FUNDING SEC. 1011. MINIMUM PARTICIPATION STANDARDS. Part I of subchapter D of chapter 1 (relating to pension, profitsharing, stock bonus, plans, etc.) is amended by adding at the end thereof the following: "Subpart B-Special Rules "Sec. 410. Minimum participation standards. "Sec. 412. Minimum funding standards. "Sec. 413. Collectively bargained plans. "Sec. 414. Definitions and special rules. "Sec. 415. Limitations on benefits and contributions under qualified plans. "SEC. 410. MINIMUM PARTICIPATION STANDARDS. "(a) PARTICIPATION.— "(1) MINIMUM AGE AND SERVICE CONDITIONS. "(A) GENERAL RULE.--A trust shall not constitute a qualified trust under section 401 (a) if the plan of which it is a part requires, as a condition of participation in the plan, that an employee complete a period of service with the employer or employers maintaining the plan extending beyond the later of the following dates "(i) the date on which the employee attains the age of 25: or "(ii) the date on which he completes 1 year of service. "(B) SPECIAL RULES FOR CERTAIN PLANS. "(i) In the case of any plan which provides that after not more than 3 years of service each participant has a right to 100 percent of his accrued benefit under the plan which is nonforfeitable (within the meaning of section 411) at the time such benefit accrues, clause (ii) of subparagraph (A) shall be applied by substituting '3 years of service' for '1 year of service'. "(ii) In the case of any plan maintained exclusively for employees of an educational institution (as defined in section 170(b)(1)(A)(ii)) by an employer which is exempt from tax under section 501 (a) which provides that each participant having at least 1 year of service has a right to 100 percent of his accrued benefit under the plan which is non forfeitable (within the meaning of section 411) at the time such benefit accrues, clause (i) of subparagraph (A) shall be applied by substituting '30' "(2) MAXIMUM AGE CONDITIONS.-A trust shall not constitute a qualified trust under section 401(a) if the plan of which it is a 26 USC 401. part excludes from participation (on the basis of age) employees who have attained a specified age, unless— "(A) the plan is a "(i) defined benefit plan, or "(ii) target benefit plan (as defined under regulations prescribed by the Secretary or his delegate), 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. "(3) DEFINITION OF YEAR OF SERVICE.— "(A) GENERAL RULE.-For purposes of this subsection, the term 'year of service' means a 12-month period during which the employee has not less than 1,000 hours of service. For purposes of this paragraph, computation of any 12-month period shall be made with reference to the date on which the employee's employment commenced, except that, under regulations prescribed by the Secretary of Labor, such computation may be made by reference to the first day of a plan year in the case of an employee who does not complete 1,000 hours of service during the 12-month period beginning on the date his employment commenced. "(B) SEASONAL INDUSTRIES.-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 may be determined under regulations prescribed by the Secretary of Labor. "(C) HOURS OF SERVICE.-For purposes of this subsection, the term 'hour of service' means a time of service determined under regulations prescribed by the Secretary of Labor. "(D) MARITIME INDUSTRIES. For purposes of this subsection, in the case of any maritime industry, 125 days of service shall be treated as 1,000 hours of service. The Secretary of Labor may prescribe regulations to carry out this subparagraph. "(4) TIME OF PARTICIPATION.—A plan shall be treated as not meeting the requirements of paragraph (1) unless it provides that any employee who has satisfied the minimum age and service requirements specified in such paragraph, and who is otherwise entitled to participate in the plan, commences participation in the plan no later than the earlier of "(A) the first day of the first plan year beginning after the date on which such employee satisfied such requirements, or "(B) the date 6 months after the date on which he satisfied such requirements, unless such employee was separated from the service before the date referred to in subparagraph (A) or (B), whichever is applicable. (5) BREAKS IN SERVICE.— "(A) GENERAL RULE.-Except as otherwise provided in subparagraphs (B), (C), and (D), all years of service with the employer or employers maintaining the plan shall be taken into account in computing the period of service for purposes of paragraph (1). 88 STAT. 900 Post, p. 901. 26 USC 401. 45 USC 181. "(B) EMPLOYEES UNDER 3-YEAR 100 PERCENT VESTING.— In the case of any employee who has any 1-year break in service (as defined in section 411(a) (6) (A)) under a plan to which the service requirements of clause (i) of paragraph (1) (B) apply, if such employee has not satisfied such requirements, service before such break shall not be required to be taken into account. "(C) 1-YEAR BREAK IN SERVICE.—In computing an employee's period of service for purposes of subsection (a)(1) in the case of any participant who has any 1-year break in service (as defined in section 411 (a) (6) (Å)), service before such break shall not be required to be taken into account under the plan until he has completed a year of service (as defined in paragraph (3)) after his return. (D) NONVESTED PARTICIPANTS.-In the case of a participant 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 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 subparagraph by reason of any prior break in service. "(b) ELIGIBILITY. "(1) IN GENERAL.- A trust shall not constitute a qualified trust under section 401 (a) unless the trust, or two or more trusts, or the trust or trusts and annuity plan or plans are designated by the employer as constituting parts of a plan intended to qualify under section 401 (a) which benefits either "(A) 70 percent or more of all employees, or 80 percent or more of all the employees who are eligible to benefit under the plan if 70 percent or more of all the employees are eligible to benefit under the plan, excluding in each case employees who have not satisfied the minimum age and service requirements, if any, prescribed by the plan as a condition of participation, or "(B) such employees as qualify under a classification set up by the employer and found by the Secretary or his delegate not to be discriminatory in favor of employees who are officers, shareholders, or highly compensated. "(2) EXCLUSION OF CERTAIN EMPLOYEES.-For purposes of paragraph (1), there shall be excluded from consideration "(A) employees not included in the plan who are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, if there is evidence that retirement benefits were the subject of good faith bargaining between such employee representatives and such employer or employers, "(B) in the case of a trust established or maintained pursuant to an agreement which the Secretary of Labor finds to be a collective bargaining agreement between air pilots represented in accordance with title II of the Railway Labor Act and one or more employers, all employees not covered by such agreement, and 55-202 O 76-6 September 2, 1974 - 73 Pub. Law 93-406 88 STAT.901 "(C) employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(b)) from the employer which constitutes income from sources within the United States (within the meaning of section 861 (a) (3)). Subparagraph (B) shall not apply in the case of a plan which provides contributions or benefits for employees whose principal duties are not customarily performed aboard aircraft in flight. "(c) APPLICATION OF PARTICIPATION STANDARDS ΤΟ CERTAIN PLANS. "(1) The provisions of this section (other than paragraph (2) of this subsection) shall not apply to— "(A) a governmental plan (within the meaning of section 414(d)), "(B) a church plan (within the meaning of section 414(e)) with respect to which the election provided by subsection (d) of this section has not been made, "(C) a plan which has not at any time after the date of the enactment of the Employee Retirement Income Security Act of 1974 provided for employer contributions, and "(D) a plan established and maintained by a society, order, or association described in section 501 (c) (8) or (9) if no part of the contributions to or under such plan are made by employers of participants in such plan. "(2) A plan described in paragraph (1) shall be treated as meeting the requirements of this section, for purposes of section 401 (a), if such plan meets the requirements of section 401 (a) (3) as in effect on the day before the date of the enactment of this section. "(d) ELECTION BY CHURCH TO HAVE PARTICIPATION, VESTING, FUNDING, ETC., PROVISIONS APPLY. "(1) IN GENERAL.-If the church or convention or association of churches which maintains any church plan makes an election under this subsection (in such form and manner as the Secretary or his delegate may by regulations prescribe), then the provisions of this title relating to participation, vesting, funding, etc. (as in effect from time to time) shall apply to such church plan as if such provisions did not contain an exclusion for church plans. "(2) ELECTION IRREVOCABLE.-An election under this subsection with respect to any church plan shall be binding with respect to such plan, and, once made, shall be irrevocable." SEC. 1012. MINIMUM VESTING STANDARDS. (a) IN GENERAL.-Subpart B of part I of subchapter D of chapter 1 is amended by adding after section 410 the following new section: "SEC. 411. MINIMUM VESTING STANDARDS. "(a) GENERAL RULE.-A trust shall not constitute a qualified trust under section 401(a) unless the plan of which such trust is a part provides that an employee's right to his normal retirement benefit is nonforfeitable upon the attainment of normal retirement age (as defined in subsection (a) (8)) and in addition satisfies the requirements of paragraphs (1) and (2) of this subsection and the requirements of paragraph (2) of subsection (b), and in the case of a defined benefit plan, also satisfies the requirements of paragraph (1) of subsection (b). "(1) EMPLOYEE CONTRIBUTIONS.-A plan satisfies the requirements of this paragraph if an employee's rights in his accrued benefit derived from his own contributions are nonforfeitable. 26 USC 911. Ante, p. 829. Ante, p. 898. Pub. Law 93-406 88 STAT. 902 . 74 September 2, 1974 "(2) EMPLOYER CONTRIBUTIONS.—A plan satisfies the requirements of this paragraph if it satisfies the requirements of subparagraph (A), (B), or (C). "(A) 10-YEAR VESTING.-A plan satisfies the requirements of this subparagraph if an employee who has at least 10 years of service has a nonforfeitable right to 100 percent of his accrued benefit derived from employer contributions. "(B) 5- TO 15-YEAR VESTING. 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 a percentage of his accrued benefit derived from employer contributions which percentage is not less than the percentage determined under the following table: 15 or more--- "(C) RULE OF 45. "If years of service equal or exceed 5 6 7 8 9 10 "(i) A plan satisfies the requirements of this subparagraph if an employee who is not separated from the service, who has completed at least 5 years of service, and with respect to whom the sum of his age and years of service equals or exceeds 45, has a nonforfeitable right to a percentage of his accrued benefit derived from employer contributions determined under the following table: Post, p. 935. "(ii) Notwithstanding clause (i), a plan shall not be treated as satisfying the requirements of this subparagraph unless any employee who has completed at least 10 years of service has a nonforfeitable right to not less than 50 percent of his accrued benefit derived from employer contributions and to not less than an additional 10 percent for each additional year of service thereafter. "(3) CERTAIN PERMITTED FORFEITURES, SUSPENSIONS, ETC.For purposes of this subsection— "(A) FORFEITURE ON ACCOUNT OF DEATH.-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 401(a) (11)). "(B) SUSPENSION OF BENEFITS UPON REEMPLOYMENT OF RETIREE.—A right to an accrued benefit derived from employer |