Benefit Accrual in Standardized Plan

[Dawn Hafner]

I would like to hear what different interpretations may be out there on when a particiapnt in a standardized plan accrues the benefit.

Option 1:

Day 1 because for participants that do not terminate during the year there is no hour requirement.

Option 2:

After they work 501 hours because if they were to have terminated they would have had to work 501 hours to get the benefit.

We are looking at whether a 12/31 plan year, standardized plan can currently amend its allocation formula to a CT design.

From the ERISA Outlines:

Page 3.227 paragraph 5 they said one interpretation the IRS had was NO benefit would accrue before a participant had 501 hours (or what ever number is in the plan) on a standardized plan. This was just one Key District office from 1998.

Thank you for any experiences or opintions you can offer. Any additional cites are apprecitated!

[actuarysmith]

At the risk of stating the obvious, either of these are possible. It depends which box you checked on your prototype.

Did the employer elect the box that says there is no service requirement for employer discretionary contributions (if so, then you cannot amend to CT for the 2002 year).

Did the employer states that participants had to accrue 501 hours for allocations? (if so, you would probably still be able to amend to CT for 2002 provided NO ONE has worked that many hours yet.)