I am looking for a cite or information to research "bad boy" clauses. Specifically, a plan sponsor would like to forfeit the account of anyone leaving their firm and going to work for a local competitor. I seem to recall these clauses were severely restricted in their use but can't remember where I can find more specifics.

See 1.401(a)(4)-4 and 1.411(d)-4 re covenants not to compete

Look at 1.411(a)-4T. The first example in © should be the most helpful.

Thanks for the cites. After reading all available info, here's what I've interpreted.
1. If a participant is fully vested, under the longest allowable vesting schedule, forfeiture under "bad boy" clause is not an option.
2. A plan may required an employee to complete/execute an employment agreement or other contract prior to allowing the employee to become a participant. This approach would not allow a forfeiture under the bad boy clause but would potentially create other legal recourse for the employer.

My conclusion: A bad boy clause can only work in a situation where a participant is not vested under the maximum statutory vesting schedule.

Am I missing anthing here???

I believe your conclusions are correct. There is an old Revenue Ruling that deals with bad boy clauses. To the best of my knowledge, the Revenue Ruling has not been superseded, revoked, or obseleted. Unfortunately without doing more research than I have time for, I was not able to find the cite. The Revenue Ruling was issued when vesting schedules were permitted to be much longer than they are now (e.g., ten year cliff vesting).

If I am remembering correctly, it is permissible to forfeit as in the following examples:

1. Plan has 3 year cliff vesting schedule, participant has 4 years of vesting service. Entire balance is forfeitable because no vesting would be required under the maximum cliff vesting schedule until the participant had five years of vesting service.

2. Plan has 5 year graded vesting, participant has five years of vesting service. Forty percent of the participant's balance would be forfeitable because only 60% vesting would be required under the maximum graded vesting schedule.

In other words, bad boy clauses are only useful if a plan has a vesting schedule that is more favorable than one of the two IRC schedules.

I also recall that the Revenue Ruling was clear that you couldn't "mix and match" cliff and graded vesting.

I don't disagree with the conclusions, but I think the Plan must state the forfeiture could occur in such cases.

Pax, you are correct. No such forfeitures could be made unless the plan explicitly provided for them and described the circumstances under which the forfeitures would be made. I had assumed (perhaps incorrectly) that in the original post a plan amendment was contemplated.

I think Rev. Rul 85-31 is the Revenue Ruling Wessex is referring to.