Retention of earnings on forfeited amounts

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AMDG    2

The Texas Optional Retirement Plan (403(b)) provides for an employer contribution that vests after 1 year of service.  If a participant terminates employment without earning a year of service, the employer contribution amount is removed from the participant's account and returned to the employer, but any accrued earnings are left in the participant's account. (If the employer contribution lost value, the loss must be made up by the vendor and returned to the employer.)  Is anyone familiar with this plan and practice? 

Current Code section 411(a) and the concept of "accrued benefit" at the account level does not apply to the plan. Earnings are not considered annual additions under section 415.  I am just trying to confirm whether this practice is well-known among industry practitioners and if so, what your anonymous thoughts are about it.

Thanks in advance.

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