MINIMUM VESTING STANDARDS.

SEC. 1012. MINIMUM VESTING STANDARDS. (a) In General.—Subpart B of part I of subchapter D of chapter 1 is amended by adding after section 410 the following new section: “SEC. 411. MINIMUM VESTING STANDARDS. “(a) General Rule.—A trust shall not constitute a qualified trust under section 401(a) unless the plan of which such trust is a part provides that an employee’s right to his normal retirement benefit is nonforfeitable upon the attainment of normal retirement age (as defined in subsection (a)(8)) and in addition satisfies the requirements of paragraphs (1) and (2) of this subsection and the requirements of paragraph (2) of subsection (b), and in the case of a defined benefit plan, also satisfies the requirements of paragraph (1) of subsection (b). “(1) Employee contributions.—A plan satisfies the requirements of this paragraph if an employee’s rights in his accrued benefit derived from his own contributions are nonforfeitable. 88 Stat. 902 “(2) Employer contributions.—A plan satisfies the requirements of this paragraph if it satisfies the requirements of subparagraph (A), (B), or (C). “(A) 10-year vesting.—A plan satisfies the requirements of this subparagraph if an employee who has at least 10 years of service has a nonforfeitable right to 100 percent of his accrued benefit derived from employer contributions. “(B) 5- to 15-year vesting.—A plan satisfies the requirements of this subparagraph if an employee who has completed at least 5 years of service has a nonforfeitable right to a percentage of his accrued benefit derived from employer contributions which percentage is not less than the percentage determined under the following table: “Years of service: Nonforfeitable percentage 5 25 6 30 7 35 8 40 9 45 10 50 11 60 12 70 13 80 14 90 15 or more 100. “(C) Rule of 45.— “(i) A plan satisfies the requirements of this subparagraph if an employee who is not separated from the service, who has completed at least 5 years of service, and with respect to whom the sum of his age and years of service equals or exceeds 45, has a nonforfeitable right to a percentage of his accrued benefit derived from employer contributions determined under the following table: “If years of service equal or exceed— and sum of age and service equals or exceeds— then the nonforfeitable percentage is— 5 45 50 6 47 60 7 49 70 8 51 80 9 53 90 10 55 100. “(ii) Notwithstanding clause (i), a plan shall not be treated as satisfying the requirements of this subparagraph unless any employee who has completed at least 10 years of service has a nonforfeitable right to not less than 50 percent of his accrued benefit derived from employer contributions and to not less than an additional 10 percent for each additional year of service thereafter. “(3) Certain permitted forfeitures, suspensions, etc.—For purposes of this subsection— “(A) Forfeiture on account of death.—A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that it is not payable if the participant dies (except in the case of a survivor annuity which is payable as provided in section 401(a)(11)). “(B) Suspension of benefits upon reemployment of retiree.—A right to an accrued benefit derived from employer 88 Stat. 903 contributions shall not be treated as forfeitable solely because the plan provides that the payment of benefits is suspended for such period as the employee is employed, subsequent to the commencement of payment of such benefits— “(i) in the case of a plan other than a multiemployer plan, by the employer who maintains the plan under which such benefits were being paid; and “(ii) in the case of a multiemployer plan, in the same industry, the same trade or craft, and the same geographic area covered by the plan as when such benefits commenced. The Secretary of Labor shall prescribe such regulations as may be necessary to carry out the purposes of this subparagraph, including regulations with respect to the meaning of the term ‘employed’. “(C) Effect of retroactive plan amendments.—A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because plan amendments may be given retroactive application as provided in section 412(c)(8). “(D) Withdrawal of mandatory contribution.— “(i) A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that, in the case of a participant who does not have a nonforfeitable right to at least 50 percent of his accrued benefit derived from employer contributions, such accrued benefit may be forfeited on account of the withdrawal by the participant of any amount attributable to the benefit derived from mandatory contributions (as defined in subsection (c)(2)(C)) made by such participant. “(ii) Clause (i) shall not apply to a plan unless the plan provides that any accrued benefit forfeited under a plan provision described in such clause shall be restored upon repayment by the participant of the full amount of the withdrawal described in such clause plus, in the case of a defined benefit plan, interest. Such interest shall be computed on such amount at the rate determined for purposes of subsection (c)(2)(C) on the date of such repayment (computed annually from the date of such withdrawal). In the case of a defined contribution plan, the plan provision required under this clause may provide that such repayment must be made before the participant has any one-year break in service commencing after the withdrawal. “(iii) In the case of accrued benefits derived from employer contributions which accrued before the date of the enactment of the Employee Retirement Income Security Act of 1974, a right to such accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that an amount of such accrued benefit may be forfeited on account of the withdrawal by the participant of an amount attributable to the benefit derived from mandatory contributions (as defined in subsection (c)(2)(C)) made by such participant before the date of the enactment of the Act if such amount forfeited is proportional to such amount withdrawn. This clause shall not apply to any plan to which any mandatory contribution is made after the date of the enactment of such Act. The Secretary or 88 Stat. 904 his delegate shall prescribe such regulations as may be necessary to carry out the purposes of this clause. “(iv) For purposes of this subparagraph, in the case of any class-year plan, a withdrawal of employee contributions shall be treated as a withdrawal of such contributions on a plan year by plan year basis in succeeding order of time. “(v) For nonforfeitability where the employee has a nonforfeitable right to at least 50 percent of his accrued benefit, see section 401(a)(19). “(4) Service included in determination of nonforfeitable percentage.—In computing the period of service under the plan for purposes of determining the nonforfeitable percentage under paragraph (2), all of an employee’s years of service with the employer or employers maintaining the plan shall be taken into account, except that the following may be disregarded: “(A) years of service before age 22, except that in the case of a plan which does not satisfy subparagraph (A) or (B) of paragraph (2), the plan may not disregard any such year of service during which the employee was a participant; “(B) years of service during a period for which the employee declined to contribute to a plan requiring employee contributions; “(C) years of service with an employer during any period for which the employer did not maintain the plan or a predecessor plan (as defined under regulations prescribed by the Secretary or his delegate); “(D) service not required to be taken into account under paragraph (6); “(E) years of service before January 1, 1971, unless the employee has had at least 3 years of service after December 31, 1970; and “(F) years of service before the first plan year to which this section applies, if such service would have been disregarded under the rules of the plan with regard to breaks in service as in effect on the applicable date. “(5) Year of service.— “(A) General rule.—For purposes of this subsection, except as provided in subparagraph (C), the term ‘year of service’ means a calendar year, plan year, or other 12-consecutive month period designated by the plan (and not prohibited under regulations prescribed by the Secretary of Labor) during which the participant has completed 1,000 hours of service. “(B) Hours of service.—For purposes of this subsection, the term ‘hours of service’ has the meaning provided by section 410(a)(3)(C). “(C) Seasonal industries.—In the case of any seasonal industry where the customary period of employment is less than 1,000 hours during a calendar year, the term ‘year of service’ shall be such period as may be determined under regulations prescribed by the Secretary of Labor. “(D) Maritime industries.—For purposes of this subsection, in the case of any maritime industry, 125 days of service shall be treated as 1,000 hours of service. The Secretary of Labor may prescribe regulations to carry out the purposes of this subparagraph. “(6) Breaks in service.— “(A) Definition of 1-year break in service.—For purposes of this paragraph, the term ‘1-year break in service’ 88 Stat. 905 means a calendar year, plan year, or other 12-consecutive-month period designated by the plan (and not prohibited under regulations prescribed by the Secretary of Labor) during which the participant has not completed more than 500 hours of service. “(B) 1 year of service after 1-year break in service.—For purposes of paragraph (4), in the case of any employee who has any 1-year break in service, years of service before such break shall not be required to be taken into account until he has completed a year of service after his return. “(C) 1-year break in service under defined contribution plan.—For purposes of paragraph (4), in the case of any participant in a defined contribution plan, or an insured defined benefit plan which satisfies the requirements of subsection (b)(1)(F), who has any 1-year break in service, years of service after such break shall not be required to be taken into account for purposes of determining the nonforfeitable percentage of his accrued benefit derived from employer contributions which accrued before such break. “(D) Nonvested participants.—For purposes of paragraph (4), in the case of a participant who, under the plan, does not have any nonforfeitable right to an accrued benefit derived from employer contributions, years of service before any 1-year break in service shall not be required to be taken into account if the number of consecutive 1-year breaks in service equals or exceeds the aggregate number of such years of service prior to such break. Such aggregate number of years of service before such break shall be deemed not to include any years of service not required to be taken into account under this subparagraph by reason of any prior break in service. “(7) Accrued benefit.— “(A) In general.—For purposes of this section, the term ‘accrued benefit’ means— “(i) in the case of a defined benefit plan, the employee’s accrued benefit determined under the plan and, except as provided in subsection (c)(3), expressed in the form of an annual benefit commencing at normal retirement age, or “(ii) in the case of a plan which is not a defined benefit plan, the balance of the employee’s account. “(B) Effect of certain distributions.—Notwithstanding paragraph (4), for purposes of determining the employee’s accrued benefit under the plan, the plan may disregard service performed by the employee with respect to which he has received— “(i) a distribution of the present value of his entire nonforfeitable benefit if such distribution was in an amount (not more than $1,750) permitted under regulations prescribed by the Secretary or his delegate, or “(ii) a distribution of the present value of his nonforfeitable benefit attributable to such service which he elected to receive. Clause (i) of this subparagraph shall apply only if such distribution was made on termination of the employee’s participation in the plan. Clause (ii) of this subparagraph shall apply only if such distribution was made on termination of the employee’s participation in the plan or under such other 88 Stat. 906 circumstances as may be provided under regulations prescribed by the Secretary or his delegate. “(C) Repayment of subparagraph (b) distributions.—For purposes of determining the employee’s accrued benefit under a plan, the plan may not disregard service as provided in subparagraph (B) unless the plan provides an opportunity for the participant to repay the full amount of the distribution described in such subparagraph (B) with, in the case of a defined benefit plan, interest at the rate determined for purposes of subsection (c)(2)(C) and provides that upon such repayment the employee’s accrued benefit shall be recomputed by taking into account service so disregarded. This subparagraph shall apply only in the case of a participant who— “(i) received such a distribution in any plan year to which this section applies, which distribution was less than the present value of his accrued benefit, “(ii) resumes employment covered under the plan, and “(iii) repays the full amount of such distribution with, in the case of a defined benefit plan, interest at the rate determined for purposes of subsection (c)(2)(C). In the case of a defined contribution plan, the plan provision required under this subparagraph may provide that such repayment must be made before the participant has any one-year break in service commencing after such withdrawal. “(8) Normal retirement age.—For purposes of this section, the term ‘normal retirement age’ means the earlier of— “(A) the time a plan participant attains normal retirement age under the plan, or “(B) the later of— “(i) the time a plan participant attains age 65, or “(ii) the 10th anniversary of the time a plan participant commenced participation in the plan. “(9) Normal retirement benefit.—For purposes of this section, the term ‘normal retirement benefit’ means the greater of the early retirement benefit under the plan, or the benefit under the plan commencing at normal retirement age. The normal retirement benefit shall be determined without regard to— “(A) medical benefits, and “(B) disability benefits not in excess of the qualified disability benefit. For purposes of this paragraph, a qualified disability benefit is a disability benefit provided by a plan which does not exceed the benefit which would be provided for the participant if he separated from the service at normal retirement age. For purposes of this paragraph, the early retirement benefit under a plan shall be determined without regard to any benefits commencing before benefits payable under title II of the Social Security Act become payable which— “(i) do not exceed such social security benefits, and “(ii) terminate when such social security benefits commence. “(10) Changes in vesting schedule.— “(A) General rule.—A plan amendment changing any vesting schedule under the plan shall be treated as not satisfy-88 Stat. 907ing the requirements of paragraph (2) if the nonforfeitable percentage of the accrued benefit derived from employer contributions (determined as of the later of the date such amendment is adopted, or the date such amendment becomes effective) of any employee who is a participant in the plan is less than such nonforfeitable percentage computed under the plan without regard to such amendment. “(B) Election of former schedule.—A plan amendment changing any vesting schedule under the plan shall be treated as not satisfying the requirements of paragraph (2) unless each participant having not less than 5 years of service is permitted to elect, within a reasonable period after the adoption of such amendment, to have his nonforfeitable percentage computed under the plan without regard to such amendment. “(b) Accrued Benefit Requirements.— “(1) General rules.— “(A) 3-percent method.—A defined benefit plan satisfies the requirements of this paragraph if the accrued benefit to which each participant is entitled upon his separation from the service is not less than— “(i) 3 percent of the normal retirement benefit to which he would be entitled if he commenced participation at the earliest possible entry age under the plan and served continuously until the earlier of age 65 or the normal retirement age specified under the plan, multiplied by “(ii) the number of years (not in excess of 33⅓) of his participation in the plan. In the case of a plan providing retirement benefits based on compensation during any period, the normal retirement benefit to which a participant would be entitled shall be determined as if he continued to earn annually the average rate of compensation which he earned during consecutive years of service, not in excess of 10, for which his compensation was the highest. For purposes of this subparagraph, social security benefits and all other relevant factors used to compute benefits shall be treated as remaining constant as of the current year for all years after such current year. “(B) 133⅓ percent rule.—A defined benefit plan satisfies the requirements of this paragraph for a particular plan year if under the plan the accrued benefit payable at the normal retirement age is equal to the normal retirement benefit and the annual rate at which any individual who is or could be a participant can accrue the retirement benefits payable at normal retirement age under the plan for any later plan year is not more than 133⅓ percent of the annual rate at which he can accrue benefits for any plan year beginning on or after such particular plan year and before such later plan year. For purposes of this subparagraph— “(i) any amendment to the plan which is in effect for the current year shall be treated as in effect for all other plan years; “(ii) any change in an accrual rate which does not apply to any individual who is or could be a participant in the current year shall be disregarded; 88 Stat. 908 “(iii) the fact that benefits under the plan may be payable to certain employees before normal retirement age shall be disregarded; and “(iv) social security benefits and all other relevant factors used to compute benefits shall be treated as remaining constant as of the current year for all years after the current year. “(C) Fractional rule.—A defined benefit plan satisfies the requirements of this paragraph if the accrued benefit to which any participant is entitled upon his separation from the service is not less than a fraction of the annual benefit commencing at normal retirement age to which he would be entitled under the plan as in effect on the date of his separation if he continued to earn annually until normal retirement age the same rate of compensation upon which his normal retirement benefit would be computed under the plan, determined as if he had attained normal retirement age on the date on which any such determination is made (but taking into account no more than the 10 years of service immediately preceding his separation from service). Such fraction shall be a fraction, not exceeding 1, the numerator of which is the total number of his years of participation in the plan (as of the date of his separation from the service) and the denominator of which is the total number of years he would have participated in the plan if he separated from the service at the normal retirement age. For purposes of this subparagraph, social security benefits and all other relevant factors used to compute benefits shall be treated as remaining constant as of the current year for all years after such current year. “(D) Accrual for service before effective date.—Subparagraphs (A), (B), and (C) shall not apply with respect to years of participation before the first plan year to which this section applies, but a defined benefit plan satisfies the requirements of this subparagraph with respect to such years of participation only if the accrued benefit of any participant with respect to such years of participation is not less than the greater of— “(i) his accrued benefit determined under the plan, as in effect from time to time prior to the date of the enactment of the Employee Retirement Income Security Act of 1974, or “(ii) an accrued benefit which is not less than one-half of the accrued benefit to which such participant would have been entitled if subparagraph (A), (B), or (C) applied with respect to such years of participation. “(E) First two years of service.—Notwithstanding subparagraphs (A), (B), and (C) of this paragraph, a plan shall not be treated as not satisfying the requirements of this paragraph solely because the accrual of benefits under the plan does not become effective until the employee has two continuous years of service. For purposes of this subparagraph, the term ‘years of service’ has the meaning provided by section 410(a)(3)(A). “(F) Certain insured defined benefit plans.—Notwithstanding subparagraphs (A), (B), and (C), a defined benefit 88 Stat. 909 plan satisfies the requirements of this paragraph if such plan— “(i) is funded exclusively by the purchase of insurance contracts, and “(ii) satisfishes the requirements of paragraphs (2) and (3) of section 412(i) (relating to certain insurance contract plans), but only if an employee’s accrued benefit as of any applicable date is not less than the cash surrender value his insurance contracts would have on such applicable date if the requirements of paragraphs (4), (5), and (6) of section 412(i) were satisfied. “(G) Accrued benefit may not decrease on account of increasing age or service.—Notwithstanding the preceding subparagraphs, a defined benefit plan shall be treated as not satisfying the requirements of this paragraph if the participant’s accrued benefit is reduced on account of any increase in his age or service. The preceding sentence shall not apply to benefits under the plan commencing before entitlement to benefits payable under title II of the Social Security Act which benefits under the plan— “(i) do not exceed such social security benefits, and “(ii) terminate when such social security benefits commence. “(2) Separate accounting required in certain cases.— A plan satisfies the requirements of this paragraph if— “(A) in the case of a defined benefit plan, the plan requires separate accounting for the portion of each employee’s accrued benefit derived from any voluntary employee contributions permitted under the plan; and “(B) in the case of any plan which is not a defined benefit plan, the plan requires separate accounting for each employee’s accrued benefit. “(3) Year of participation.— “(A) Definition.—For purposes of determining an employee’s accrued benefit, the term ‘year of participation’ means a period of service (beginning at the earliest date on which the employee is a participant in the plan and which is included in a period of service required to be taken into account under section 410(a)(5)) as determined under regulations prescribed by the Secretary of Labor which provide for the calculation of such period on any reasonable and consistent basis. “(B) Less than full time service.—For purposes of this paragraph, except as provided in subparagraph (C), in the case of any employee whose customary employment is less than full time, the calculation of such employee’s service on any basis which provides less than a ratable portion of the accrued benefit to which he would be entitled under the plan if his customary employment were full time shall not be treated as made on a reasonable and consistent basis. “(C) Less than 1,000 hours of service during year.— For purposes of this paragraph, in the case of any employee whose service is less than 1,000 hours during any calendar year, plan year or other 12-consecutive month period designated by the plan (and not prohibited under regulations prescribed by the Secretary of Labor) the calculation of his period of service shall not be treated as not made on a reasonable and consistent basis solely because such service is not taken into account. 88 Stat. 910 “(D) Seasonal industries.—In the case of any seasonal industry where the customary period of employment is less than 1,000 hours during a calendar year, the term ‘year of participation’ shall be such period as determined under regulations prescribed by the Secretary of Labor. “(E) Maritime industries.—For purposes of this subsection, in the case of any maritime industry, 125 days of service shall be treated as a year of participation. The Secretary of Labor may prescribe regulations to carry out the purposes of this subparagraph. “(c) Allocation of Accrued Benefits Between Employer and Employee Contributions.— “(1) Accrued benefit derived from employer contributions.—For purposes of this section, an employee’s accrued benefit derived from employer contributions as of any applicable date is the excess, if any, of the accrued benefit for such employee as of such applicable date over the accrued benefit derived from contributions made by such employee as of such date. “(2) Accrued benefit derived from employee contributions.— “(A) Plans other than defined benefit plans.—In the case of a plan other than a defined benefit plan, the accrued benefit derived from contributions made by an employee as of any applicable date is— “(i) except as provided in clause (ii), the balance of the employee’s separate account consisting only of his contributions and the income, expenses, gains, and losses attributable thereto, or “(ii) if a separate account is not maintained with respect to an employee’s contributions under such a plan, the amount which bears the same ratio to his total accrued benefit as the total amount of the employee’s contributions (less withdrawals) bears to the sum of such contributions and the contributions made on his behalf by the employer (less withdrawals). “(B) Defined benefit plans.— “(i) In general.—In the case of a defined benefit plan providing an annual benefit in the form of a single life annuity (without ancillary benefits) commencing at normal retirement age, the accrued benefit derived from contributions made by an employee as of any applicable date is the annual benefit equal to the employee’s accumulated contributions multiplied by the appropriate conversion factor. “(ii) Appropriate conversion factor.—For purposes of clause (i), the term ‘appropriate conversion factor’ means the factor necessary to convert an amount equal to the accumulated contributions to a single life annuity (without ancillary benefits) commencing at normal retirement age and shall be 10 percent for a normal retirement age of 65 years. For other normal retirement ages the conversion factor shall be determined in accordance with regulations prescribed by the Secretary or his delegate. “(C) Definition of accumulated contributions.—For purposes of this subsection, the term ‘accumulated contributions’ means the total of— “(i) all mandatory contributions made by the employee, 88 Stat. 911 “(ii) interest (if any) under the plan to the end of the last plan year to which subsection (a)(2) does not apply (by reason of the applicable effective date), and “(iii) interest on the sum of the amounts determined under clauses (i) and (ii) compounded annually at the rate of 5 percent per annum from the beginning of the first plan year to which subsection (a)(2) applies (by reason of the applicable effective date) to the date upon which the employee would attain normal retirement age. For purposes of this subparagraph, the term ‘mandatory contributions’ means amounts contributed to the plan by the employee which are required as a condition of employment, as a condition of participation in such plan, or as a condition of obtaining benefits under the plan attributable to employer contributions. “(D) Adjustments.—The Secretary or his delegate is authorized to adjust by regulation the conversion factor described in subparagraph (B), the rate of interest described in clause (iii) of subparagraph (C), or both, from time to time as he may deem necessary. The rate of interest shall bear the relationship to 5 percent which the Secretary or his delegate determines to be comparable to the relationship which the long-term money rates and investment yields for the last period of 10 calendar years ending at least 12 months before the beginning of the plan year bear to the long-term money rates and investment yields for the 10-calendar year period 1964 through 1973. No such adjustment shall be effective for a plan year beginning before the expiration of 1 year after such adjustment is determined and published. “(E) Limitation.—The accrued benefit derived from employee contributions shall not exceed the greater of— “(i) the employee’s accrued benefit under the plan, or “(ii) the accrued benefit derived from employee contributions determined as though the amounts calculated under clauses (ii) and (iii) of subparagraph (C) were zero. “(3) Actuarial adjustment.—For purposes of this section, in the case of any defined benefit plan, if an employee’s accrued benefit is to be determined as an amount other than an annual benefit commencing at normal retirement age, or if the accrued benefit derived from contributions made by an employee is to be determined with respect to a benefit other than an annual benefit in the form of a single life annuity (without ancillary benefits) commencing at normal retirement age, the employee’s accrued benefit, or the accrued benefits derived from contributions made by an employee, as the case may be, shall be the actuarial equivalent of such benefit or amount determined under paragraph (1) or (2). “(d) Special Rules.— “(1) Coordination with section 401(a)(4).—A plan which satisfies the requirements of this section shall be treated as satisfying any vesting requirements resulting from the application of section 401(a)(4) unless— “(A) there has been a pattern of abuse under the plan (such as a dismissal of employees before their accrued benefits become nonforfeitable) tending to discriminate in favor of employees who are officers, shareholders, or highly compensated, or 88 Stat. 912 “(B) there have been, or there is reason to believe there will be, an accrual of benefits or forfeitures tending to discriminate in favor of employees who are officers, shareholders, or highly compensated. “(2) Prohibited discrimination.—Subsection (a) shall not apply to benefits which may not be provided for designated employees in the event of early termination of the plan under provisions of the plan adopted pursuant to regulations prescribed by the Secretary or his delegate to preclude the discrimination prohibited by section 401(a)(4). “(3) Termination or partial termination; discontinuance of contributions.—Notwithstanding the provisions of subsection (a), a trust shall not constitute a qualified trust under section 401(a) unless the plan of which such trust is a part provides that— “(A) upon its termination or partial termination, or “(B) in the case of a plan to which section 412 does not apply, upon complete discontinuance of contributions under the plan, the rights of all affected employees to benefits accrued to the date of such termination, partial termination, or discontinuance, to the extent funded as of such date, or the amounts credited to the employees’ accounts, are nonforfeitable. This paragraph shall not apply to benefits or contributions which, under provisions of the plan adopted pursuant to regulations prescribed by the Secretary or his delegate to preclude the discrimination prohibited by section 401(a)(4), may not be used for designated employees in the event of early termination of the plan. “(4) Class year plans.—The requirements of subsection (a)(2) shall be deemed to be satisfied in the case of a class year plan if such plan provides that 100 percent of each employee’s right to or derived from the contributions of the employer on his behalf with respect to any plan year are nonforfeitable not later than the end of the 5th plan year following the plan year for which such contributions were made. For purposes of this section, the term ‘class year plan’ means a profit-sharing, stock bonus, or money purchase plan which provides for the separate nonforfeitability of employees’ rights to or derived from the contributions for each plan year. “(5) Treatment of voluntary employee contributions.—In the case of a defined benefit plan which permits voluntary employee contributions, the portion of an employee’s accrued benefit derived from such contributions shall be treated as an accrued benefit derived from employee contributions under a plan other than a defined benefit plan. “(6) Accrued benefit not to be decreased by amendment.—A plan shall be treated as not satisfying the requirements of this section if the accrued benefit of a participant is decreased by an amendment of the plan, other than an amendment described in section 412(c)(8). “(e) Application of Vesting Standards to Certain Plans.— “(1) The provisions of this section (other than paragraph (2)) shall not apply to— “(A) a governmental plan (within the meaning of section 414(d)), “(B) a church plan (within the meaning of section 414(e)) with respect to which the election provided by section 410(d) has not been made, 88 Stat. 913 “(C) a plan which has not, at any time after the date of the enactment of the Employee Retirement Income Security Act of 1974, provided for employer contributions, and “(D) a plan established and maintained by a society, order, or association described in section 501(c) (8) or (9), if no part of the contributions to or under such plan are made by employers of participants in such plan. “(2) A plan described in paragraph (1) shall be treated as meeting the requirements of this section, for purposes of section 401(a), if such plan meets the vesting requirements resulting from the application of sections 401(a)(4) and 401(a)(7) as in effect on the day before the date of the enactment of the Employee Retirement Income Security Act of 1974.” (b) Comparability of Plans.—Section 401(a) (relating to requirements for qualification) is amended by adding at the end of paragraph (5) the following: “For purposes of determining whether two or more plans of an employer satisfy the requirements of paragraph (4) when considered as a single plan, if the amount of contributions on behalf of the employees allowed as a deduction under section 404 for the taxable year with respect to such plans, taken together, bears a uniform relationship to the total compensation, or the basic or regular rate of compensation, of such employees, the plans shall not be considered discriminatory merely because the rights of employees to, or derived from, the employer contributions under the separate plans do not become nonforfeitable at the same rate. For the purposes of determining whether two or more plans of an employer satisfy the requirements of paragraph (4) when considered as a single plan, if the employees’ rights to benefits under the separate plans do not become nonforfeitable at the same rate, but the levels of benefits provided by the separate plans satisfy the requirements of regulations prescribed by the Secretary or his delegate to take account of the differences in such rates, the plans shall not be considered discriminatory merely because of the difference in such rates.” (c) Variations From Certain Vesting and Accrued Benefits Requirements.—In the case of any plan maintained on January 1, 1974, if, not later than 2 years after the date of the enactment of this Act, the plan administrator petitions the Secretary of Labor, the Secretary of Labor may prescribe an alternate method which shall be treated as satisfying the requirements of subsection (a)(2) of section 411 of the Internal Revenue Code of 1954, or of subsection (b)(1) (other than subparagraph (D) thereof) of such section 411, or of both such provisions for a period of not more than 4 years. The Secretary may prescribe such alternate method only when he finds that— (1) the application of such requirements would increase the costs of the plan to such an extent that there would result a substantial risk to the voluntary continuation of the plan or a substantial curtailment of benefit levels or the levels of employees’ compensation, (2) the application of such requirements or discontinuance of the plan would be adverse to the interests of plan participants in the aggregate, and (3) a waiver or extension of time granted under section 412(d) or (e) would be inadequate. In the case of any plan with respect to which an alternate method has been prescribed under the preceding provisions of this subsection for a period of not more than 4 years, if, not later than 1 year before the expiration of such period, the plan administrator petitions the Secretary of Labor for an extension of such alternate method, and the Secretary makes the findings required by the preceding sentence, such alternate method may be extended for not more than 3 years.