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Part 5 · Chapter 2

Minimum Participation and Vesting

Law stated as of October 3, 2026 · Qualified Plan Testing, Eligibility, and Vesting

Scope and status

The service- and eligibility rules are in active transition — long-term part-time (LTPT) eligibility, the SECURE 2.0 cash-out increase, and the forfeiture-use rules all changed post-2019 — so confirm the current guidance and indexed figures before relying on them.

Citations are to primary authority (Code §§410(a), 401(a)(26), 411, 414(a), 416; ERISA §§202, 203, 204, 210; the Treasury regulations under §§1.410(a)-, 1.401(a)(26)-, 1.411(a)-, 1.411(d)-2; the DOL service-crediting rules in 29 C.F.R. Part 2530; and controlling case law). Related questions are treated elsewhere: §410(b) coverage/nondiscrimination in this Part's General Qualified Plan Testing (§410(b) and §401(a)(4)); top-heavy mechanics in this Part's 401(k) and 401(m), ADP/ACP, §415, §416 Top-Heavy, and §404 Deductions; controlled-group aggregation in Part 1 (Controlled Groups and Affiliated Service Groups); full/partial-termination mechanics and §411(d)(6) in Part 2 (Plan Documents, Amendments, Mergers, and Terminations); and participation/vesting failure correction in Part 21 (Plan Corrections: EPCRS, VFCP, and DFVCP).

Threshold framing. ERISA does not require an employer to offer any particular benefit or to cover every employee; a plan that is offered must satisfy the minimum participation, vesting, and funding standards. Case law: Supreme Court — Shaw v. Delta Air Lines, 463 U.S. 85 (1983); Circuit — Bauer v. Summit Bancorp, 325 F.3d 155 (3d Cir. 2003). Distinguish eligibility (the age/service gate, this Part) from coverage (§410(b), Part 5 (Qualified Plan Testing, Eligibility, and Vesting)).

Sections

Part A is shown in full. The other sections are listed by title; their text is available to subscribers.

Part A — Minimum Participation / Eligibility (§410(a), ERISA §202)

A1.The age-21 / one-year-of-service maximum and entry dates

Part 5, ch. 2, § A1

A qualified plan may not condition participation on attaining an age older than 21 or completing more than one year of service (1,000 hours in the eligibility computation period); once an employee meets the conditions, the plan must admit them by the earlier of the first day of the next plan year or 6 months after the requirements are met (the statutory entry-date rule). Statute: Code §410(a)(1), (a)(4); ERISA §202; Final reg: Treas. Reg. §1.410(a)-3, -4. A plan may use more generous (faster) conditions.

A2.The two-year-service / 100%-vesting alternative

Part 5, ch. 2, § A2

A plan (other than a 401(k) plan's elective-deferral feature) may require up to two years of service for eligibility only if it provides 100% immediate vesting upon entry. Statute: Code §410(a)(1)(B); ERISA §202(a)(1)(B). The §401(k) deferral feature may never require more than one year (and is also subject to the LTPT rule, A5).

A3.Permitted classifications vs. disguised age/service conditions

Part 5, ch. 2, § A3

A plan may exclude employees by bona fide classification (job category, division, salaried/hourly) that is not an age/service proxy, but the exclusion is then tested under §410(b) coverage and §401(a)(4). Statute: Code §410(a), (b); Final reg: Treas. Reg. §1.410(a)-3(e). A classification that is really an indirect age/service condition (e.g., excluding "part-time" or "seasonal" employees, or those working under 1,000 hours in a way that can exclude an employee who has completed a year of service) is treated as an impermissible service condition and fails §410(a) regardless of coverage testing. Final reg: Treas. Reg. §1.410(a)-3(e)(1); Practitioner consensus. A plan may also use different age/service conditions for different contribution sources, subject to coverage testing.

A4.Waiver/opt-out, misclassification, and rehires

Part 5, ch. 2, § A4

A plan may permit a voluntary, irrevocable opt-out of participation only under narrow conditions (and a blanket "evergreen" waiver raises coverage/CODA issues). Final reg; Practitioner consensus. Misclassified workers (independent contractors later reclassified as employees, leased employees under §414(n)) may be retroactively entitled to participation — confirm classification. On rehire, the break-in-service rules (Part C) determine whether prior service is restored and whether the employee re-enters immediately.

A5.Long-term part-time (LTPT) employees — current rule

Part 5, ch. 2, § A5

Currency item (central). A 401(k) plan (and an ERISA-covered 403(b) plan) must permit elective deferrals by a long-term part-time employee — one who has completed two consecutive 12-month periods with at least 500 hours of service each and is age 21 by the end of that period. Statute: Code §401(k)(2)(D), §403(b)(12), as amended by SECURE Act §112 and SECURE 2.0 §125; Proposed reg — reliance authorized: REG-104194-23 (88 Fed. Reg. 82796); IRS Notice 2024-73. SECURE 2.0 reduced the period from three years to two, effective for plan years beginning after December 31, 2024. LTPT eligibility is deferral-only (the employer need not provide match/nonelective contributions); if it does, special vesting crediting applies — each 12-month period with 500+ hours counts as a year of vesting service (for 401(k) plans, periods beginning before January 1, 2021 are disregarded; for ERISA 403(b) plans, periods before January 1, 2023). Statute: Code §401(k)(15); SECURE Act §112(b), as amended by SECURE 2.0 §125; ERISA §203(b)(4); IRS Notice: Notice 2024-73. The final 401(k) LTPT regulations the IRS intends to issue will apply no earlier than plan years beginning on or after January 1, 2026 (Notice 2024-73); for earlier years a good-faith reasonable interpretation of the statute and the proposed regulations governs. Non-ERISA and governmental plans are not subject to ERISA LTPT.

Part B — Section 401(a)(26) Minimum Participation (Defined Benefit)

  1. B1The lesser-of-50-or-40% ruleSubscribers

Part C — Service Crediting and Breaks in Service

  1. C1Year of service; the two crediting methods; computation periodsSubscribers
  2. C2Hours of service and equivalenciesSubscribers
  3. C3Breaks in serviceSubscribers
  4. C4Cash-out, repayment, and service restorationSubscribers

Part D — Minimum Vesting (§411, ERISA §203)

  1. D1Nonforfeitability at NRA; employee contributionsSubscribers
  2. D2The vesting schedulesSubscribers
  3. D3Top-heavy and fully-vested contributionsSubscribers
  4. D4Vesting service and schedule amendmentsSubscribers

Part E — Forfeitures

  1. E1When forfeitures occur and the cash-out limitSubscribers
  2. E2Permitted uses, the forfeiture-timing rule, and the litigationSubscribers
  3. E3Missing participantsSubscribers

Part F — Full and Partial Termination (vesting consequence)

  1. F1Full termination and discontinuance of contributionsSubscribers
  2. F2Partial termination and the turnover presumptionSubscribers

Part G — Predecessor Employer and M&A Service (§414(a), ERISA §210)

  1. G1Crediting service across a transactionSubscribers

Worked examples

The first Part of each chapter is open to everyone. The remaining sections, with their authority and practice points, are available to subscribers and to clients of ERISA Benefits Law Group, PLLC whose engagement includes access.

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