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IRS Makes Publications on Minimum Vesting Standards Available

The IRS has issued two publications that provide information and forms relevant to minimum vesting standards for defined benefit plans and defined contribution plans. The new versions are for use during the CYCLE A Submission Period — Feb. 1, 2016 through Jan. 31, 2017.

Employee Benefits Plans Explanation No. 2A, which is intended for DB plans, contains Publication 4962, Form 5624 and Form 8401; Employee Benefits Plans Explanation No. 2, which is intended for DC plans, contains Publication 6389, Form 5623, and Form 6041. The explanations and worksheets are intended to identify major problems regarding plan vesting and apply to most plans to which Code Section 411 applies.

Generally, a “yes” answer to a question on the worksheet indicates a favorable conclusion; a “no” answer signals a problem concerning plan qualification. The IRS requests an explanation for any “no” answer in the space provided on a worksheet.

A basic requirement regarding vesting standards is that each participant’s vested interest must satisfy the statutory minimum at all times. A plan that generally provides faster vesting than the statutory minimum will not fail to qualify merely because the plan does not adhere to the specific language found in the statute.