[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: 26CFR1.411(a)-4T]

[Page 589-590]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.411(a)-4T  Forfeitures, suspensions, etc. (temporary).

    (a) Nonforfeitability. Certain rights in an accrued benefit must be 
nonforfeitable to satisfy the requirements of section 411(a). This 
section defines the term ``nonforfeitable'' for purposes of these 
requirements. For purposes of section 411 and the regulations 
thereunder, a right to an accrued benefit is considered to be 
nonforfeitable at a particular time if, at that time and thereafter, it 
is an unconditional right. Except as provided by paragraph (b) of this 
section, a right which, at a particular time, is conditioned under the 
plan upon a subsequent event, subsequent performance, or subsequent 
forbearance which will cause the loss of such right is a forfeitable 
right at that time. Certain adjustments to plan benefits, such as 
adjustments in excess of reasonable actuarial reductions, can result in 
rights being forfeitable. Rights which are conditioned upon a 
sufficiency of plan assets in the event of a termination or partial 
termination are considered to be forfeitable because of such condition. 
However, a plan does not violate the nonforfeitability requirements 
merely because in the event of a termination an employee does not have 
any recourse toward satisfaction of his nonforfeitable benefits

[[Page 590]]

from other than the plan assets, the Pension Benefit Guaranty 
Corporation, or a trust established and maintained pursuant to sections 
4041(c)(3)(B) (ii) or (iii) and section 4049 of ERISA with respect to 
the plan. Furthermore, nonforfeitable rights are not considered to be 
forfeitable by reason of the fact that they may be reduced as allowed 
under sections 401(a)(5) and 401(l). To the extent that rights are not 
required to be nonforfeitable to satisfy the minimum vesting standards, 
or the nondiscrimination requirements of section 401(a)(4), they may be 
forfeited without regard to the limitations on forfeitability required 
by this section. The right of an employee to repurchase his accrued 
benefit for example under section 411(a)(3)(D), is an example of a right 
which is required to satisfy such standards. Accordingly, such a right 
is subject to the limitations on forfeitability. Rights which are 
required to be prospectively nonforfeitable under the vesting standards 
are nonforfeitable and may not be forfeited until it is determined that 
such rights are, in fact, in excess of the vesting standards. Thus, 
employees have a right to vest in the accrued benefits if they continue 
in employment of employers maintaining the plan unless a forfeitable 
event recognized by section 411 occurs. For example, if a plan covered 
employees in Division A of Corporation X under a plan utilizing a 5-year 
100 percent vesting schedule, the plan could not forfeit employees' 
rights on account of their moving to service in Division B of 
Corporation X prior to completion of 5 years of service even though 
employees are not vested at that time.
    (b) [Reserved]
    (c) Examples. The rules of this section ae illustrated by the 
following examples:

    Example (1). Corporation A's plan provides that an employee is fully 
vested in his employer-derived accrued benefit after completion of 3 
years of service. The plan also provides that if the employee works for 
a competitor he forfeits his rights in the plan. Such provision could 
result in the forfeiture of an employee's rights which are required to 
be nonforfeitable under section 411 and therefore the plan would not 
satisfy the requirements of section 411. If the plan limited the 
forfeiture to employees who completed less than 5 years of service, the 
plan would not fail to satisfy the requirements of section 411 because 
the forfeitures under this provision are limited to rights which are in 
excess of the minimum required to be nonforfeitable under section 
411(a)(2)(A).

[T.D. 8170, 53 FR 241, Jan. 6, 1988]