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Eligibility part-time exclusion and past service


Tom
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A client opened a new 401(k) plan 1/1/2021.  The plan has immediate eligibility for those employed as of 1/1/2021 but excludes part-time/seasonal/temporary (those scheduled to work <1000 hours).

I am going to ask them to confirm who they determined met eligibility and provided enrollment material.  As TPA we can't make that determination not knowing expected hours.   

Probably an easy question - what about someone who is not scheduled to work 1000 hours in 2021 but has worked 1000 hours in a prior year?  I think they should have been enrolled as all service would have to be considered.  Normally any new plan without the part-time exclusion would include prior year 1000 hour employees as eligible so I believe I have my answer.

Thanks

Tom

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This brings up a different question I want to ask. They want the document to say that everyone working on 1/1/21 is eligible 1/1/21. Let's assume that, for everyone else they have a 12 month eligibility requirement using Counting Hours (1000 hours). What happens to all the part-time employees that never worked 1000 hours in the past? I think they come into the plan on 1/1/21 because you are waiving all service requirements if employed on that day.

And you wouldn't do a special 1/1/21 eligibility that would say (only those that worked 1000 hours in any prior year) because that defeats the purpose of the special eligibility provision.

So, I don't think so, but would there be any way to allow FTEs to enter on 1/1/21 but not part-timers?

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12 minutes ago, Gadgetfreak said:

So, I don't think so, but would there be any way to allow FTEs to enter on 1/1/21 but not part-timers?

Just write the provisions to say anyone who has worked 12 month with 1000 hours into the plan enters the plan on the next entry date....

For eligibility you can't ignore service before the plan it set up.   So if someone worked 1,000 hours in a 12 month period would enter on 1/1/2021.  I am ignoring any discussion of breaks in service or Rule of Parity to keep it simple for a comment section. 

If you won't put anything in the document that resets the clock if a person worked 1,000 hours in 1999 they would enter on 1/1/2021 as that is the first entry date after they met the requirements. 

I agree if you say anyone working on 1/1/2021 enters all employees enter.  

If the client can break down their company by groups/divisions and one of them has most of the part-time employees you exclude that group/division and keep them out if you can pass coverage.  

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"Just write the provisions to say anyone who has worked 12 month with 1000 hours into the plan enters the plan on the next entry date...."

But if you are doing that, you wouldn't need a special eligibility provision. I can see a situation where an employer wants all FTEs eligible when they start a plan (i.e. waiving eligibility requirements using the special eligibility provision), all new EEs after that date would waive 12 months with 1,000 hours and never allow PT EEs to participate. I am just thinking that, absent excluding a class of EEs (subject to coverage testing each year), I don't think it can be done. Anyone disagree with that?

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43 minutes ago, Gadgetfreak said:

"Just write the provisions to say anyone who has worked 12 month with 1000 hours into the plan enters the plan on the next entry date...."

But if you are doing that, you wouldn't need a special eligibility provision. I can see a situation where an employer wants all FTEs eligible when they start a plan (i.e. waiving eligibility requirements using the special eligibility provision), all new EEs after that date would waive 12 months with 1,000 hours and never allow PT EEs to participate. I am just thinking that, absent excluding a class of EEs (subject to coverage testing each year), I don't think it can be done. Anyone disagree with that?

If you are saying my wording wouldn't allow a person hired on 9/1/2020 to enter 1/1/2021 because they don't have 12 months that is correct.   If the employer wants everyone to enter on 1/1/2021 they could write such a provision.   I just don't know a way to do that excludes part time people unless you can come up with an acceptable exclusion based on division, location....  But saying all people expected to work to be part time are excluded is a problem.  

At some point it might need to be conceded that the law doesn't allow the employer to do everything they want. 

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What about using 83 hours in December 2020 for a special 1/1/2021 entry and then going to 12-month 1,000 hour rule thereafter? That might limit (most of) your early entries to full timers. Or 167 in Nov/Dec? Or 250 in 4Q2020? You get the picture.

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