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Determining Plan Eligibility with Multiple Periods of Service


AJC

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Have a calendar year plan. An employee after age 21 started working 01/01/2018; worked 1,000 hours; and, terminated service 11/01/2018.

The employee was rehired 08/01/2019; worked 501 hours during 2019; and, remains employed on 12/31/2019.

I think the earliest possible date this employee will be eligible to participate is 01/01/2021, which will be based on their 2020 employment and hours of service. Am I thinking correctly?

The plan has the following language:

"You will become eligible to make Salary Deferral Contributions on the a) first day of the first month of the Plan Year or b) first day of the seventh month of the Plan Year, coincident with or next following the date you attain age 21 and you complete one (1) Year of Eligibility Service, provided that you are an Eligible Employee on that date.

Computing Service

With respect to eligibility to make Salary Deferral  Contributions, "Year of Eligibility Service" means an Eligibility Computation Period during which you complete at least 1,000 hours of service.

"Eligibility Computation Period" means a 12-consecutive month period beginning with your first day of employment. Any succeeding Eligibility Computation Period will then switch to the Plan Year, beginning with the Plan Year that includes your first anniversary of employment. You will generally earn an hour of service for each hour you are paid for the performance of duties for the Employer (however, numerous exceptions and special rules apply).

All eligibility service with the Employer is taken into account."

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Employee entered the plan and was eligible to defer beginning on their date of re-hire, 8/1/2019.

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.
corey@pppc.co

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On 3/14/2020 at 11:35 AM, C. B. Zeller said:

Employee entered the plan and was eligible to defer beginning on their date of re-hire, 8/1/2019.

Agreed.  The employee met the eligibility requirements but wasn't there on the entry date. Therefore, when he is rehired he enters immediately since he would have entered already if he has been there on the entry date.  That's the way re-hires work.

Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC
President
Qualified Plan Consultants, Inc.
46 Daggett Drive
West Springfield, MA 01089
413-736-2066
larrystarr@qpc-inc.com

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  • 2 weeks later...

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