Vesting for New Hires

[Guest Cbanarer]

How do you handle determination of eligibility and service for vesting for a participant who works less than 1,000 hours during the plan year in which they are hired?

EXAMPLE: Plan year is calendar year; EE hired 8/15/01 and works 950 hours in 2001, then 2080 hours in 2002. First year of service for both eligility and vesting is 8/15/01-8/14/02, during which he worked over 1,000 hours; second year of service is the 2002 plan year.

He should end 2002 with 2 years of service but our system does not give him credit for a year of service for his first 12 months. Does any system handle this properly?

[actuarysmith]

WDTDS??? (What does the document say?)

The plan document addresses whether you are using hours, or elapsed time. Further, if you are using hours it will stipulate actual hours or some equivalency.

Further, it will state whether vesting is based upon anniversary of employment, or plan year.

Without knowing what your specific document says, no one can answer your questions........................

[Richard Anderson]

If I understand the question, Cbanarer doesn't have a problem with the document or how to determine eleigibility or vesting service. The problem is the pension software is not able to calculate correctly based on the document.

We have to check all new hires to make sure that the pension system has correctly determined YOS for the first eligibility period.

[Guest Cbanarer]

Thank you, Richard. It is a system question that I have. It seems that most systems will not handle this issue. I guess you have to check your census each year and override the YOS determined by your administration system if it is incorrect.

That also brings up the question of how you obtain the data from your clients. Our census request just asks for hrs worked during plan year. Should we be adding a column to show hours worked between first day of plan year and anniversary for people hired previous plan year?

How do most people handle this?

[Richard Anderson]

Our census request also asks only for plan year data. We have mostly small plans so we can look carefully at census data.

If for the first year of hire an employee worked less than 1,000 hours, then the next year we ask the client for hours for the 12 month period from date of hire and for hours on plan year basis also.

[Tom Poje]

I would go back to actuarysmith's advice.

check the document.

All the documents I have seen base vesting on the plan year. (Except of course in the case of elapsed time) Thus, based on the original post, vesting should not be a problem.

Eligibility is a different issue. The first 'year' is based on anniversary from date of hire(see DOL reg 2530.202-2(a) according to the ERISA Outline Book), after that the eligibility usually switches to plan year. It can get real interesting in the case of a plan with 2 year eligibility.

A full time ee hired 12/10/2000 completes 1 year on 12/10/2001.

Also completes 1 year fron 1/1/2001 - 12/31/2001!!!!!!!!Thus they enter on 1/1/2002

Hint: Don't switch to plan year method for purposes of eligibility when using 2 year wait.