(a) General. Under section 204(b)(3)(A) of the Act and section
411(b)(3)(A) of the Code, a defined benefit pension plan may determine
an employee's service for purposes of benefit accrual on the basis of
accrual computation periods, as specified in Sec. 2530.204-2, or on any
other basis which is reasonable and consistent and which takes into
account all covered service during the employee's participation in the
plan which is included in a period of service required to be taken into
account under section 202(b) of the Act and section 410(a)(5) of the
Code. If, however, a plan determines an employee's service for purposes
of benefit accrual on a basis other than computation periods, it must be
possible to prove that, despite the fact that benefit accrual under the
plan is not based on computation periods, the plan's provisions meet at
least one of the three benefit accrual rules of section 204(b)(1) of the
Act and section 411(b)(1) of the Code under all circumstances. Further,
a plan which does not provide for benefit accrual on the basis of
computation periods may not disregard service under section 204(b)(3)(C)
of the Act and section 411(b)(3)(C) of the Code.
(b) Examples. The following are examples of methods of determining
an employee's period of service for purposes of benefit accrual under
which an employee's period of service is not determined on the basis of
computation periods but which may be used by a plan provided that the
requirements of paragraph (a) of this section are met:
(1) Career compensation. A defined benefit formula based on a
percentage of compensation earned in a participant's career or during
participation, with no variance depending on hours completed in given
periods.
(2) Credited hours. A defined benefit formula pursuant to which an
employee is credited with a specified amount of accrual for each hour of
service (or hour worked or regular time hour) completed by the employee
during his or her career.
(3) Elapsed time. See Sec. 2530.200b-9(e).
