Eligibility

[pmacduff]

I have a calendar 401(k) plan with 6 months of eligibility, quarterly entry dates. This client's industry is such that employees are constantly coming & going. If an employee works for 2 months, leaves and returns 2 months later, do I have to count the original two months? I was under the impression that the employee "starts over" since they never became a participant. If you look at a calendar year, let's say an employee works Feb, Mar and April, leaves, then returns Oct, Nov & Dec. Do they enter January 1st or can I wait until April 1st (provided they remain employed)? The document is using the elapsed time" method. Any input is appreciated.

[Guest bjschiedel]

I think the key word in your situation is "consecutive." The definition of a year of service is generally 12 "consecutive" months in which an employee has worked for the employer. I would pare down this statutory definition to mean a 6 "consecutive" month period in your case. From this I conclude that none of these individuals will ever meet the eligibility requirements laid forth in the plan as long as they continue to work in increments of fewer than 6 "consecutive" months. What do you think? It cannot be considered a break in service each time b/c BIS typically implies that they were once eligible.

[pmacduff]

I agree "wholeheartedly", that was my take as well, if you never satisfy eligibility, you would need to start over each time, until such time as you did complete 6 consecutive months. I also had the same thought for BIS rules; ie., they come into play once you are a participant, not before. Thanks for the input! Others agree or disagree??

[Guest Ben S]

Be careful, though. The elapsed time method may throw this off kilter for you. Do you have the ASPA/Tripodi materials?

Im actually reading that the continuous employment NOT required unless the Elapsed Time method is being used. Unfortunately, a cite is not made but it is at the end of his Eligibility Computation Period" section. Too bad the document is probably silent on this but be sure to exhaust that avenue

[Guest F1fan]

I agree with Ben S. In addition to the plan document, you should look at the elapsed time regulations under at 1.410(a)-7, particularly the service spanning rules at 1.410(a)-7©(2)(iii).

[pmacduff]

I'm resurrecting this thread. Calendar year Plan has 6 months elapsed time eligibility, age 21, quarterly entry dates. Here is the participant data: date of birth is 05/15/1981. Original date of hire is 07/13/1998.

hired 07/13/1998 Termed 07/31/1998

rehired 07/05/1999 Termed 08/13/1999

rehired 02/03/2003 Termed 02/07/2003

rehired 06/02/2003 Termed 06/27/2003

rehired 02/16/2004 Termed 02/20/2004

rehired 06/07/2004 Termed 06/25/2004

rehired 03/23/2007 Termed 03/28/2007

rehired 06/18/2007 Termed 07/20/2007

rehired 06/02/2008 termed 06/27/2008

rehired 06/08/2009 termed 08/14/2009

rehired 11/12/2012

Question of the hour...when did this person enter the plan?

[rcline46]

Never - using elapsed time (and read your doc on 'Period of Service' - I do not see any employment year (required for elapsed time) in which the person worked 6 months.

[Tom Poje]

on page 6 of the pdf, see line c of the IRS guideline

(if I post this one enough, maybe everybody will have a copy)

This particular section deals with Elapsed time, service and breaks in service

min partic standards publication 6388.pdf

[BG5150]

Does the service spanning rules apply anywhere there? I didn't peruse the data given.

[pmacduff]

I think that section is the "service spanning rule". If applied I think this employee would have entered the plan on 02/03/2003 when he was rehired and age 21. But there was a break of approx 3 1/2 years between the 08/13/1999 date and the 02/03/2003 date. I'm just confused at this point.

Tom - I noticed you didn't weigh in on an entry date?!?

[rcline46]

And the person who chose elapsed time should be forever barred from practicing/advising! Integrating elapsed time with the the 5 year break rules from REA is not very pretty. The vesting schedule in the plan may also play a role here.

Does the plan have a 1 year hold out? If not 2/3/2003 entry. If yes then 2/16/04. I forgot the rehire in 12 mos from TERM date rehire rule. Not only that, it seems that the person has accumulated a bunch of vesting service.

Thank you Tom.

[pmacduff]

The Company wanted to get Execs in within 6 mos (used to be 1 YOS, 12 mos, 1000 hours) but didn't realize the impact on the NHCE population. No issues with vesting - this person has never had 1000 hours in any plan year (vesting is based on 12 mos 1000 hours). No 1 yr holdout.

The corrective QNEC will be 100% vested anyway

Thank you!

[BG5150]

Just pay him "under the table" and not even worry about it any more...

[Tom Poje]

Lady MacDuff:

To be (in the plan) or not to be (in the plan) - that is the question

and I'm too swamped at the moment to go back and look at all those dates. It's just in the last few weeks there have been a few posts regarding eligibility, and the pdf sticks in mind.

I was hoping that would possible answer the question w/o straing my old brain gears.