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TITLE 26-INTERNAL REVENUE CODE of the current year for all years after the current year. (C) Fractional rule A defined benefits plan satisfies the re- quirements of this paragraph if the accrued benefit to which any participant is entitled upon his separation from the service is not less than a fraction of the annual benefit commencing at normal retirement age to which he would be entitled under the plan as in effect on the date of his separation if he continued to earn annually until normal retirement age the same rate of compensa- tion upon which his normal retirement benefit would be computed under the plan, determined as if he had attained normal re- tirement age on the date on which any such determination is made (but taking into ac- count no more than the 10 years of service immediately preceding his separation from service). Such fraction shall be a fraction, not exceeding 1, the numerator of which is the total number of his years of participa- tion in the plan (as of the date of his sepa- ration from the service) and the denomina- tor of which is the total number of years he would have participated in the plan if he separated from the service at the normal re- tirement age. For purposes of this subpara- graph, social security benefits and all other relevant factors used to compute benefits shall be treated as remaining constant as of the current year for all years after such current year. (D) Accrual for service before effective date Subparagraphs (A), (B), and (C) shall not apply with respect to years of participation before the first plan year to which this sec- tion applies, but a defined benefit plan sat- isfies the requirements of this subpara- graph with respect to such years of partici- pation only if the accrued benefit of any participant with respect to such years of participation is not less than the greater of- (i) his accrued benefit determined under the plan, as in effect from time to time prior to September 2, 1974, or (i) an accrued benefit which is not less than one-half of the accrued benefit to which such participant would have been entitled if subparagraph (A), (B), or (C) applied with respect to such years of par- ticipation. (E) First two years of service Notwithstanding subparagraphs (A), (B), and (C) of this paragraph, a plan shall not be treated as not satisfying the require- ments of this paragraph solely because the accrual of benefits under the plan does not become effective until the employee has two continuous years of service. For pur- poses of this subparagraph, the term "years of service" has the meaning provided by section 410(a)(3)(A). (F) Certain insured defined benefit plans Notwithstanding subparagraphs (A), (B), and (C), a defined benefit plan satisfies the requirements of this paragraph if such plan- (i) is funded exclusively by the purchase of insurance contracts, and (ii) satisfies the requirements of para- graphs (2) and (3) of section 412() (relat- ing to certain insurance contract plans), but only if an employee's accrued benefit as of any applicable date is not less than the cash surrender value his insurance con- tracts would have on such applicable date if the requirements of paragraphs (4), (5), and (6) of section 412(1) were satisfied. (G) Accrued benefit may not decrease on account of increasing age or service Notwithstanding the preceding subpara- graphs, a defined benefit plan shall be treated as not satisfying the requirements of this paragraph if the participant's ac- crued benefit is reduced on account of any increase in his age or service. The preceding sentence shall not apply to benefits under the plan commencing before entitlement to benefits payable under title II of the Social Security Act which benefits under the plan- (i) do not exceed such social security benefits, and (ii) terminate when such social security benefits commence. (2) Separate accounting required in certain cases A plan satisfies the requriements of this paragraph if- (A) in the case of the defined benefit plan, the plan requires separate accounting for the portion of each employee's accrued benefit derived from any voluntary employ- ee contributions permitted under the plan; and (B) in the case of any plan which is not a defined benefit plan, the plan requires sepa- rate accounting for each employee's accrued benefit. (3) Year of participation (A) Definition For purposes of determining an employ- ee's accrued benefit, the term "year of par- ticipation" means a period of service (begin- ning at the earliest date on which the em- ployee is a participant in the plan and which is included in a period of service re- quired to be taken into account under sec- tion 410(a)(5)) as determined under regula- tions prescribed by the Secretary of Labor which provide for the calculation of such period on any reasonable and consistent basis. (B) Less than full time service For purposes of this paragraph, except as provided in subparagraph (C), in the case of any employee whose customary employ- ment is less than full time, the calculation of such employee's service on any basis which provides less than a ratable portion of the accrued benefit to which he would be entitled under the plan if his customary em- ployment were full time shall not be treated as made on a reasonable and consistent basis. Page 329 §411