[Code of Federal Regulations]
[Title 26, Volume 5]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.410(a)-8T]

[Page 549]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.410(a)-8T  Year of service; break in service (temporary).

    (a)-(b) [Reserved]
    (c) Breaks in service.
    (1) [Reserved]
    (2) Employees under 2-year 100 percent vesting schedule--(i) General 
rule. In the case of an employee who incurs a 1-year break in service 
under a plan which provides that after not more than 2 years of service 
each participant's right to his accrued benefit under the plan is 
completely nonforfeitable (within the meaning of section 411 and the 
regulations thereunder) at the time such benefit accrues, the employee's 
service before the break in service is not required to be taken into 
account after the break in service in determining the employee's years 
of service under section 410(a)(1) and Sec. 1.410(a)-3 if such employee 
has not satisfied such service requirement.
    (ii) Example. The rules of this subparagraph are illustrated by the 
following example:

    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 2 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 2 years without a break in service, i.e., 2 
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 would become eligible to participate.

------------------------------------------------------------------------
                                          Hours of service completed
                Year                 -----------------------------------
                                      Employee A  Employee B  Employee C
------------------------------------------------------------------------
1...................................       1,000       1,000       1,000
2...................................       1,000         700         500
3...................................       1,000       1,000       1,000
4...................................       1,000       1,000         700
5...................................       1,000       1,000       1,000
------------------------------------------------------------------------

    Note: Employee A will have satisfied the plan's service requirement 
at the end of year 2, Employee B at the end of year 3, and Employee C at 
the end of year 5.

    (3) One-year break in service--
    (i) [Reserved]
    (ii) Examples. The rules provided by this subparagraph are 
illustrated by the following examples:

    Example (1). Employee A completes a year of service under a plan 
computing service by the actual counting of hours for the 12-month 
period ending December 31, 1989, and incurs a 1-year break in service 
for the 12-month period ending December 31, 1990. The plan does not 
contain the provisions permitted by section 410(a)(5)(B) (relating to 2-
year 100 percent vesting) and section 410(a)(5)(D) (relating to 
nonvested participants). Thereafter, he does not complete a year of 
service. As of January 1, 1991, in computing his period of service under 
the plan his service prior to December 31, 1990, is not required to be 
taken into account for purposes of section 410(a)(1) and Sec. 1.410(a)-
3.

[T.D. 8170, 53 FR 239, Jan. 6, 1988]