Page 326

TITLE 26-INTERNAL REVENUE CODE (ii) Notwithstanding clause (1), a plan shall not be treated as satisfying the re- quirements 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 contribu- tions and to not less than an additional 10 percent for each additional year of service thereafter. (3) Certain ptrmitted 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 pro- vides that it is not payable if the partici- pant dies (except in the case of a survivor annuity which is payable as provided in sec- tion 401(a)(11)). (B) Suspension of benefits upon reemployment of retiree A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan pro- vides that the payment of benefits is sus- pended for such period as the employee is employed, subsequent to the commence- ment of payment of such benefits- (i) in the case of a plan other than a multi-employer plan, by the employer who maintains the plan under which such benefits were being paid; and (ii) in the case of a multiemployer plan, in the same industry, the same trade or craft, and the same geographic area cov- ered by the plan as when such benefits commenced. The Secretary of Labor shall prescribe such regulations as may be necessary to carry out the purposes of this subparagraph, in- cluding regulations with respect to the meaning of the term "employed". (C) Effect of retroactive plan amendments A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because plan amend- ments may be given retroactive application as provided in section 412(c)(8). (D) Withdrawal of mandatory contribution (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 partici- pant who does not have a nonforfeitable right to at least 50 percent of his accrued benefit derived from employer contribu- tions, such accrued benefit may be forfeit- ed on account of the withdrawal by the participant of any amount attributable to the benefit derived from mandatory con- tributions (as defined in subsection (c)(2)(C)) made by such participant. (ii) Clause (I) shall not apply to a plan unless the plan provides that any accrued benefit forfeited under a plan provision desrrlbed in such clause shall be restored upon repayment by the participant of the full amount of the withdrawal described in such clause plus, in the case of a de- fined benefit plan, interest. Such interest shall be computed on such amount at the rate determined for purposes of subsec- tion (c)(2)(C) on the date of such repay- ment (computed annually from the date of such withdrawal). In the case of a de- fined contribution plan, the plan provi- sion required under this clause may pro- vide that such repayment must be made before the participant has any one-year break in service commencing after the withdrawal. (iii) In the case of accrued benefits de- rived from employer contributions which accrued before September 2, 1974, a right to such accrued benefit derived from em- ployer contributions shall not be treated as forfeitable solely because the plan pro- vides that an amount of such accrued benefit may be forfeited on account of the withdrawal by the participant of an amount attributable to the benefit de- rived from mandatory contributions (as defined in subsection (c)(2)(C)) 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 shall prescribe such regulations as may be nec- essary to carry out the purposes of this clause. (iv) For purposes of this subparagraph, in the case of any class-year plan, a with- drawal of employee contributions shall be treated as a withdrawal of such contribu- tions on a plan year by plan year basis in succeeding order of time. (v) For nonforfeitability where the em- ployee has a nonforfeitable right to at least 50 percent of his accrued benefit, see section 401(a)(19). (4) Service included In determination of nonforfei- table percentage In computing the period of service under the plan for purposes of determining the non- forfeitable percentage under paragraph (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 following may be disregarded: (A) years of service before age 22, except that in the case of a plan which does not satisfy subparagraph (A) or (B) of para- graph (2), the plan may not disregard any such year of service during which the em- ployee was a participant; (B) years of service during a period for which the employee declined to contribute to a plan requiring employee contributions; (C) years of service with an employer during any period for which the employer did not maintain the plan or a predecessor plan (as defined under regulations pre- scribed by the Secretary; (D) service not required to be taken into account under paragraph (6); (E) years of service before January 1, 1971, unless the employee has had at least 3 years of service after December 31, 1970; and Page 326 411