Most profit sharing plans provide that the nonvested portion of an employee's profit sharing benefit can be forfeited when the employee incurs a break in service. A break in service often results in termination. Employees can also break their service with an employer by quitting, retiring, dying, becoming disabled, getting laid-off, or being discharged for cause. Some of these methods of incurring a break from service are voluntary while others are involuntary. Whether an employee's profit sharing benefit can be forfeited may depend on whether his break in service was voluntary or involuntary. The issue that will be addressed here is whether a break in service that occurs because of a natural disaster should result in the forfeiture of an employee's nonvested profit sharing benefit. Part one will focus on the effects of a natural disaster on employment. Part two will discuss the operation of a profit sharing plan. Part three will examine the nature of involuntary terminations. Part four will evaluate court decisions on how break in service rules should apply to involuntary terminations. Part five will propose a statutory amendment to the break in service rule. The conclusion will then recommend how break in service rules should be applied to terminations which occur as a result of a natural disaster.
Note, Single-Employer Profit Sharing Plans: Should a Break in Service That Occurs because of a Natural Disaster Result in the Forfeiture of a Plan Participant's Nonvested Profit Sharing Benefit, 42 Clev. St. L. Rev. 509 (1994)