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This discussion has implications in another current thread. That other thread essentially asks the question: what is the participant's last day of employment? IMO, organizations that don't have robust HR capabilities are better served by using the 1,000 hour rule. As far as RBG's comment regarding cause for concern, I would say that is the very nicest way of wording it. If left to my own devices I would say that whoever suggested 2,080 hours would result in the crediting of two years of vesting service is dangerously incompetent and any organization that doesn't remove that person from client responsibilities is complicit.

That kind of provision is pretty common for determining years of service for participation. I've never seen it used for vesting service.

Based on my experience this year, I think this is the safest approach. I had a participant this year who termed 12/30 and who wasn't allocated profit sharing based on the plan's last day rule. The client called to ask why, since 12/30 was the last "work day" of the year. They understood my explanation based on what they provided and the plan language, but ended up clarifying that 12/30 was reported as her termination date only because 12/31 fell on a Saturday, and that the participant was indeed still considered "employed" on 12/31 despite that not being a work day. It worked out fine, but from a client-happiness point of view I'll plan to ask first in the future!

I agree -- but I would raise the question with the client before accepting either. Often it is something they haven't considered and the date on the census may not reflect what was supposed to happen.

The recordkeeper is not just wrong, they are so wrong it is cause for concern... I agree with what you are illustrating, but I would say that the last year of service is not really earned until the end of the limitation year (12/31/2017) so it would be 30 months for the 3 years.. Unless the participant terminated right at the 24 month mark of course...

You didn't miss anything. They don't understand how hours based service works. Counting hours does vest faster than elapsed time, but not not like that. With a calendar year plan, someone at 40 hours per week hired on 7/1/2015 will end up with 3 years of vesting service by 7/1/2017. At 2080 per year, that's 1040 hours from 7/1/2015-12/31/2015, 2080 for 1/1/2016-12/31/2016 and 1040 from 1/1/2017-6/30/2017, So, it's possible to get 3 years of service in a 24 month period.

The record keeper is wrong. You can work every hour of the year, but you never earn more than 1 Year of Service in a 12 month period. Their programming may have problems with it, but that is something they should be able to fix.

I agree with Austin. If we get a census that says termination date 12/30, then no allocation. If they say term date 12/31, then they get the allocation.

I don't want to speculate ahead of time as to what arguments the ex-wife might make. I just think that when we've already got inquiries from two different parties, we should notify both of them of this fact and let them both submit claims. PA can adjudicate those claims if they materialize. And as to my original question, absent a plan provision, I'm thinking I've got confirmation that the mere fact that the beneficiary form wasn't filed until after the death isn't fatal. Now the task is to make sure that the PA follows all claims procedures, so that its determination is likely to be respected if the whole mess ends up in court.

Thanks Bill! Sounds like the IRS is saying (Example 4) that the person is not employed on 12/31 in this example.

They are beyond the time period to deposit annual additions for the 2015 year, so the only way a 2015 contribution can be done now is under EPCRS. The SH contribution is required, so it definitely needs to be corrected. If it isn't corrected, the plan is disqualified. If the PS contribution was discretionary, I don't know if it can be corrected. Rev. Proc. 2016-51, Section 6.02(4)(b) says that corrective deposits are considered annual additions for the year being corrected, but the normal rules under Section 404 regarding deductions apply. With a correction being made now, I read that as you would allocate for 2015, but deduct in 2017. I'm not a tax person, but I would agree with you that they should not have deducted it for 2015 when it wasn't deposited.

If you intend for the SH match to satisfy both the ADP and ACP safe harbors, I would complete the document to reflect that both were intended to be satisfied. Your document provider should be able to help you with that. As John noted, it is possible to have a safe harbor match formula that meets the ADP safe harbor requirements, but not the ACP safe harbor requirements. I wouldn't want the document to say we did not intend to satisfy the ACP SH if we do.

You mean something actually can be deleted from the interweb - PERMANENTLY? Doesn't that go against a fundamental law of nature?