Rules relating to a general rule for a year of service, hours of service, and maritime industries apply for purposes of section 410(a) and the regulations thereunder.
Example. A qualified plan computing service by the actual counting of hours provides full and immediate vesting. The plan can not require as a condition of participation that an employee complete 3 consecutive years of service with the employer because the requirement as to consecutive years is not permitted under section 410(a) (5). However, such a plan can require 3 years without a break in service, i.e., 3 years with no intervening years in which the employee fails to complete more than 500 hours of service. Under a plan containing such a participation requirement, the following example illustrates when employees whould become eligible to participate.
Year | Hours of service completed | ||
Employee A | Employee B | Employee C | |
1 | 1,000 | 1,000 | 1,000 |
2 | 1,000 | 1,000 | 500 |
3 | 1,000 | 700 | 1,000 |
4 | 1,000 | 1,000 | 700 |
5 | 1,000 | 1,000 | 1,000 |
6 | 1,000 | 1,000 | 1,000 |
NOTE. Employee A will have satisfied the plan's service requirement at the end of year 3. Employee B at the end of year 4, and Employee C at the end of year 6.
Example. In 1980, A, who was hired at age 35, separates from the service of X Corporation after completing 4 years of service. At this time A had no vested benefits. In 1985, after incurring 5 consecutive one-year breaks in service, A was reemployed. Under section 410(a)(5)(D), A's 4 years of service may be disregarded because they are exceeded by the number of years of consecutive one-year breaks (5) after such service.
26 C.F.R. §1.410(a)-5
Sec. 410 (88 Stat. 898; 26 U.S.C. 410 )