Common use of Partial Vesting Clause in Contracts

Partial Vesting. For purposes of ap- plying this paragraph (d), if only a por- tion of a participant’s interest in a contract becomes nonforfeitable in a year, then the portion that is non- forfeitable and the portion that fails to be nonforfeitable are each treated as separate contracts. In addition, for purposes of applying this paragraph (d), if a contribution is made to an annuity contract in excess of the limitations of section 415(c) and the excess is main- tained in a separate account, then the portion of the contract that includes the excess contributions account and the remainder are each treated as sepa- rate contracts. Thus, if an annuity con- tract that includes an excess contribu- tions account changes from forfeitable to nonforfeitable during a year, then the portion that is not attributable to the excess contributions account con- stitutes a section 403(b) contract (as- suming it otherwise satisfies the re- quirements to be a section 403(b) con- tract) and is not included in gross in- come, and the portion that is attrib- utable to the excess contributions ac- count is included in gross income in ac- cordance with section 403(c). See § 1.403(b)–4(f) for additional rules. [T.D. 9340, 72 FR 41141, July 26, 2007; 72 FR 54352, Sept. 25, 2007]