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Rehire do we count vested balance in Aftertax or DB?


Jim Chad

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When someone is rehired, they have immediate entry if they had a vested balance in employer contributions.

I know pretax and Roth are counted as employer and Rollover is not.

Is voluntary aftertax counted?

How about the Employers DB Plan.  Do we count that?

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The ERISA Outline Book

Chapter 4 Section  V Part C has

2.e.Rule applies only to participants. Since IRC §411(a)(6)(D) and ERISA §203(b)(3)(D) refer to a "participant" having the requisite number of consecutive breaks in service, it is presumed that this rule cannot be applied to an employee who has not become a participant in the plan at the time the break in service period begins. Apparently then, the rule of parity does not apply to an employee whose break in service period began prior to the effective date of a plan, even if the employee would have otherwise been a participant in the plan if the plan had been in effect and even if the employee has incurred at least 5 consecutive breaks in service.

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This comment makes no mention of 'other plans' but reference the plan itself. Since a plan could exclude years prior to the effective date of the plan, I would say you look at each individual plan by itself, so if you were vested in an existing or prior DB that has no effect when looking at the 401k plan.

as for voluntary after tax, again the ERISA Outline book 2c1a, when referring to the old rules indicated "Contributions that were treated like elective deferrals, such as qualified nonelective contributions (QNECs), could be disregarded for this purpose."

since under the new rules you now include deferrals when determining vesting I would guess you include after tax as well because it seems to me after tax contributions are sorted of treated like deferrals.

The only possible exception, at the ASPPA 2010 Conference (assuming the IRS comment is valid) is that if the participant never deferred (since they had no balance) you could disregard prior service even though the individual was 100% vested. (Q and A #8)

 

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I don't think a vested or unvested accrued benefit is relevant to re-entry.  Re-entry is an eligibility concept. If a participant terminates before the entry date, but has a year of service, the participant enters in the plan on the first entry date on or after the date of re-hire, unless the participant was gone for five years and the plan excludes the pre-break eligibility service.  This is true whether or not the participant had a vested benefit.     

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ERISAAPPLE, you are correct in what you said. But I am looking at a slightly different scenario.  For eligibility, we cannot exclude past service, even after a 5 year break, if the Participant ever had a vested balance of any amount.

We can exclude rollover accounts from this.  I am looking at what else can we exclude.

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