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TITLE 26-INTERNAL REVENUE CODE (C) Less than 1,000 hours of service during year For purposes of this paragraph, in the case of any employee whose service is less than 1,000 hours during any calendar year, plan year or other 12-consecutive month period designated by the plan (and not pro- hibited under regulations prescribed by the Secretary of Labor) the calculation of his period of service shall not be treated as not made on a reasonable and consistent basis solely because such service is not taken into account. (D) 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 participation" shall be such period as determined under regula. tions prescribed by the Secretary of Labor. (E) Maritime industries For purposes of this subsection, in the case of any maritime industry, 125 days of service shall be treated as a year of partici- pation. The Secretary of Labor may pre- scribe regulations to carry out the purposes of this subparagraph. (c) Allocation of accrued benefits between employer and employee contributions (1) Accrued benefit derived from employer contri- butions For purposes of this section, an employee's accrued benefit derived from employer contri- butions as of any applicable date is the excess, if any, of the accrued benefit for such employee as of such applicable date over the accrued benefit derived from contributions made by such employee as of such date. (2) Accrued benefit derived from employee contri- butions (A) Plans other than defined benefit plans In the case of a plan other than a defined benefit plan, the accrued benefit derived from contributions made by an employee as of any applicable date is- (i) except as provided in clause (ii), the balance of the employee's separate ac- count consisting only of his contributions and the income, expenses, gains, and losses attributable thereto, or (ii) if a separate account is not main- tained with respect to an employee's con- tributions under such a plan, the amount which bears the same ratio to his total ac- crued benefit as the total amount of the employee's contributions (less withdraw- als) bears to the sum of such contribu- tions and the contributions made on his behalf by the employer (less withdraw- als). (B) Defined benefit plans (i) In general In the case of a defined benefit plan providing an annual benefit in the form of a single life annuity (without ancillary benefits) commencing at normal retire- ment age, the accrued benefit derived from contributions made by an employee as of any applicable date is the annual benefit eaual to the employee's accumu- lated contributions multiplied by the ap- propriate conversion factor. (ii) Appropriate conversion factor For purposes of clause (i), the term "ap- propriate conversion factor" means the factor necessary to convert an amount equal to the accumulated contributions to a single life annuity (without ancillary benefits) commencing at normal retire- ment age and shall be 10 percent for a normal retirement age of 65 years. For other normal retirement ages the conver- sion factor shall be determined in accor- dance with regulations prescribed by the Secretary. (C) Definition of accumulated contributions For purposes of this subsection, the term "accumulated contribution" means the total of- (1) all mandatory contributions made by the employee, (it) interest (if any) under the plan to the end of the last plan year to which subsection (a)(2) does not apply (by reason of the applicable effective date), and (iii) interest on the sum of the amounts determined under clauses (i) and (il) com- pounded annually at the rate of 5 percent per annum from the beginning of the first plan year to which subsection (a)(2) ap- plies (by reason of the applicable effective date) to the date upon which the employ- ee would attain normal retirement age. For purposes of this subparagraph, the term "mandatory contributions" means amounts contributed to the plan by the em- ployee which are required as a condition of employment, as a condition of participation in such plan, or as a condition of obtaining benefits under the plan attributable to em- ployer contributions. (D) Adjustments The Secretary is authorized to adjust by regulation the conversion factor described in subparagraph (B), the rate of interest de- scribed in clause (iii) of subparagraph (C), or both, from time to time as he may deem necessary. The rate of interest shall bear the relationship to 5 percent which the Sec- retary determines to be comparable to the relationship which the long-term money rates and investment yields for the last period of 10 calendar years ending at least 12 months before the beginning of the plan year bear to the long-term money rates and investment yields for the 10-calendar year period 1964 through 1973. No such adjust- ment shall be effective for a plan year be- ginning before the expiration of 1 year after such adjustment is determined and published. (E) Limitation The accrued benefit derived from employ- ee contributions shall not exceed the great- er of- (i) the employee's accrued benefit under the plan, or (i) the accrued benefit derived from em- ployee contributions determined as Page 330 § 411