What Is a Break in Service?

If a Participant does not earn a required amount of service over a specified period of time, he will incur a Break in Service. Prior to January 1, 1998, if the Break was prolonged beyond specified limits, it could become permanent and, unless the Participant had already met the requirements for vesting, resulted in the loss of previously earned Qualified Years and benefits (for all purposes except Normal Death Benefits). Effective January 1, 1998, this rule continues to apply for purposes of determining a Participant’s Normal Retirement Date but no longer applies to vesting. However, service and benefits forfeited prior to 1998 due to these rules will remain forfeited for retirement and vesting purposes. Additionally, even after January 1, 1998, you will still need to become vested in order to receive a retirement benefit.

One-Year Break in Service

A Participant will incur a one-year Break in any Plan Year that he does not earn a Qualified Year (eight Credited Weeks).

Permanent Break in Service

Prior to January 1, 1998, if a Participant who was not vested incurred too many consecutive one-year Breaks in Service, the Break in Service became permanent. In addition, the Participant lost all of the Qualified Years and accrued benefits he had previously earned and his participation in the Plan was terminated. You could have more than one consecutive permanent Break in Service. While Qualified Years and benefits forfeited prior to 1998 will not be reinstated, beginning January 1, 1998, a Break in Service will no longer result in a forfeiture of vested years and benefits. However, it may delay your normal retirement date if you are not otherwise vested.

Example 1:

Participant A earned two Qualified Years in 1987 and 1988. However, Participant A did not earn an additional Qualified Year from 1989 to 1993. Participant A thus incurred a permanent Break in Service at the end of 1993. As a result, Participant A lost credit for the two Qualified Years and benefits he previously earned in 1987 and 1988.

Assume Participant A earns two more Qualified Years in 1996 and 1997 and then leaves the Industry for five years. Under the Plan rules in effect prior to January 1, 1998, at the end of 2002, he would have lost credit for 1996 and 1997 service and benefits. Under the rules that became effective January 1, 1998, Participant A retains credit for the earlier two years. If he earns three more Qualified Years at any time, he will be vested. Moreover, his vested benefits will include the benefits earned in 1996 and 1997. However, Participant A is not reinstated with his earlier service or benefits earned for 1987 and 1988.

Example 2:

Participant B earned Qualified Years in 1991, 1992 and 1993. She stopped working from 1994 through 1998 and attained age 65 in 1999. At the end of 1998 she had a permanent Break in Service because she did not work for five consecutive years. As a result, she is not eligible to retire at 65 because she incurred a permanent Break in Service before reaching 65. (If Participant B had attained age 65 in 1998, she would have attained her Normal Retirement Age because she attained age 65 before having a permanent Break in Service.)

Under the rules in effect prior to January 1, 1998, Participant B would also have lost all of her Qualified Years because of the permanent Break in Service. However, under the rules that became effective January 1, 1998, Participant B retains the three Qualified Years she had earned. Thus, Participant B can vest (and retire) by returning to work at any time and earning two more Qualified Years. Her Normal Retirement Age will be the first of the month after she earns her second additional Qualified Year.

Between January 1, 1974, and December 31, 1985, a Break in Service becomes permanent if the Participant has at least three consecutive one-year Breaks and the number of such one-year Breaks equals or exceeds the number of Qualified Years the Participant had previously accrued.

For example, if you had accrued two Qualified Years as of December 31, 1978, and then suffered three one-year Breaks in Service because you did not earn a Qualified Year in 1979, 1980 and 1981, your Break in Service would be permanent. You would be terminated as a Participant and you would lose the two Qualified Years you had previously earned. You will also lose credit for the contributions attributable to Covered Earnings on or prior to December 31, 1981. However, if you had accrued four Qualified Years as of December 31, 1978, the Break in Service would not be permanent because the number of Qualified Years you had earned exceeded the number of one-year Breaks you incurred.

Between January 1, 1986, and December 31, 1997, a Break in Service becomes permanent if the Participant has at least five consecutive one-year Breaks in Service and the number of such one-year Breaks equals or exceeds the number of Qualified Years the Participant had previously accrued.

For example, if you had accrued four Qualified Years as of December 31, 1992, and then incurred five one-year Breaks by failing to earn a Qualified Year from 1993 to 1997, your Break in Service would be permanent because you had at least five consecutive one-year Breaks and the number of one-year Breaks exceeded the number of Qualified Years you had accrued. You would also lose credit for all contributions attributable to Covered Earnings on or prior to December 31, 1997.

On the other hand, if you had accrued four Qualified Years and then incurred four one-year Breaks, the Break in Service would not be permanent because you had less than five consecutive one-year Breaks. However, if you then incur another one-year Break, for a total of five consecutive one year Breaks in Service, your Break in Service would be permanent.

Grace Periods

A Participant may be eligible for a grace period if his or her failure to earn a Qualified Year is because of disability or family or parental leave as described below. This grace period extends the time a Participant has to earn the required service; it does not add to the Qualified Years he has accrued. It is a period which is disregarded in determining whether a Break in Service is permanent. For example, if you incur one-year Breaks in 1994 and 1996, but have a grace period in 1995, the Plan will ignore 1995, and treat 1994 and 1996 as consecutive one-year Breaks.

Beginning January 1, 1986, the Plan provides a grace period for Participants who fail to earn a Qualified Year because of the birth or adoption of a child (or if a child is placed for adoption with the Participant).

Beginning January 1, 1991, a grace period is also provided for Participants who fail to earn a Qualified Year because they are totally disabled. In order to be considered totally disabled, the Participant must be entitled to Social Security Disability benefits under Title II of the Social Securities Act for at least one month during the year.

Beginning February 5, 1994, a grace period is also provided to certain Participants who take a family leave covered by the Family and Medical Leave Act of 1993.

For complete details regarding these grace periods, contact the Administrative Office.

Curing a Break in Service

Because Breaks in Service continue to affect whether you may receive a retirement benefit if you are not vested at attainment of age 65, curing a Break in Service remains relevant. A one-year Break or a series of one-year Breaks will be cured if the Participant earns a Qualified Year before the Break in Service becomes permanent. For example, suppose you incur four one-year Breaks and then earn a Qualified Year. The Qualified Year would repair the four previous one year Breaks. Thereafter, you would not incur a permanent Break in Service unless and until you incur a new string of at least five consecutive one-year Breaks, which exceeds the number of Qualified Years you have accrued at that time.

Participation After a Break in Service

If you have a permanent Break in Service prior to 1998, your new participation in the Plan will begin when an Employer contributes on your behalf after the Break in Service. Prior to January 1, 1998, if you do not complete a Qualified Year in the five years after your permanent Break in Service, you will have a second permanent Break in Service and forfeit the contributions made during these five years as well.