(a) Designation of vesting computation periods. Except as provided
in paragraph (b) of this section, a plan may designate any 12-
consecutive-month period as the vesting computation period. The period
so designated must apply equally to all participants. This requirement
may be satisfied even though the actual 12-consecutive-month periods are
not the same for all employees (e.g., if the designated vesting
computation period is the 12-consecutive-month period beginning on an
employee's employment commencement date and anniversaries of that date).
The plan is prohibited, however, from using any period that would result
in artificial postponement of vesting credit, such as a period meassured
by anniversaries of the date four months following the employment
commencement date.
(b) Plans with 3-year 100 percent vesting. For rules regarding when
a participant has a nonforfeitable right to his accrued benefit, see
section 202(a)(1)(B)(i) of the Act and section 410(a)(1)(B)(i) of the
Code and regulations issued thereunder.
(c) Amendments to change the vesting computation period. (1) A plan
may be amended to change the vesting computation period to a different
12-consecutive-month period provided that as a result of such change no
employee's vested percentage of the accrued benefit derived from
employer contributions is less on any date after such change than such
vested percentage would be in the absence of such change. A plan
amendment changing the vesting computation period shall be deemed to
comply with the requirements of this subparagraph if the first vesting
computation period established under such amendment begins before the
last day of the preceding vesting computation period and an employee who
is credited with 1,000 hours of service in both the vesting computation
period under the plan before the amendment and the first vesting
computation period under the plan as amended is credited with 2 years of
service for those vesting computation periods. For example, a plan which
has been using a calendar year vesting computation period is amended to
provide for a July 1-June 30 vesting computation period starting in
1977. Employees who complete more than 1,000 hours of service in both of
the 12-month periods extending from January 1, 1977 to December 31, 1977
and from July 1, 1977 to June 30, 1978 are advanced two years on the
plan's vesting schedule. The plan is deemed to meet the requirements of
this subparagraph.
(2) For additional requirements pertaining to changes in the vesting
schedule, see section 203(c)(1) of the Act and section 411(a)(10) of the
Code and the regulations issued thereunder.
(d) Service preceding a break in service. For purposes of applying
section 203(b)(3)(D) of the Act and section 411(a)(6)(D) of the Code,
(relating to counting years of service before a break in service for
vesting purposes), the computation periods used by the plan in computing
years of service before such break must be the vesting computation
periods. (For application of the break in service rules, see section
203(b)(3)(D) and section 411(a)(6)(D) of the Code and regulations issued
thereunder.)
