Eligibility Issues

[Fred Payne]

Can a Plan Sponsor set eligibility for participation at 1,000 hours and 6 months of service?

I understand that if an Employee fails to work 1,000 hours, the eligibility then reverts to 1,000 hours and a Year of Service.

[Guest b2kates]

When is the entry date after attaining eligibilty?

[mbozek]

I dont see why a plan could not provide that an employee is eligible to participate at the earlier of 6 mos and 1000 hrs of service or 1yr and 1000 hrs of svc. and joins the plan on the next following entry date.

[Fred Payne]

The entry date is the 1st day of each calendar quarter

[jaemmons]

If you are using an IDP than I don't see a problem, as long as you don't preclude employees from participating as soon as they obtain 1000 in their initial 12 months of employment. Normally, if hours are going to be attached to eligibility of less than one year, an equivalency is used (i.e.-83.33 hours/month) in order to not require more than 1000 hours for initial plan participation.

I don't see why an employer would not allow employees to participate, assuming this is a 401(k), unless they have a top heavy issue.

[E as in ERISA]

In general, if you are not using a full year as the computation period for eligibility, then you are considered to be using the "elapsed time" method (instead of the "hours" method). Under the "elapsed time" method, you cannot impose an hours requirement (i.e., you cannot prorate the hours). A person is eligible if they remain in employment during a specified period of time without regard to number of hours work.

However, what many companies are doing is allowing earlier entry to some participants (e.g., based on 500 hours in six months). Then they are backstopping it with a rule that allows employees to enter the plan if they have 1,000 hours in a one year period. (But some are forgetting that you apply the lowest common denominator in performing coverage testing....)

[jaemmons]

I don't mean to disagree with Katherine, but I do. You can place an hours requirement with a service period of less than one year, so long as you do not prevent employees who would have attained 1000 hours of service in 12 months from participating. This would be violating the maximum statutory eligibility requirements.

Although it is requested that you use an "elapsed time" method, if you wish to keep "seasonal" or part time ee's from immediately becoming eligible after 6 months of employment without directly excluding them based upon their hours (which is not allowed under the regs) you can set the plan up this way. The only problem is that employees who meet the 1 year requirement MUST be allowed to participate regardless of the 6 month rule.

[actuarysmith]

Are you not both saying the same thing?

Under the old Corbel standardized prototype, you were not allowed to impose any hours requirement if you were requiring less than one year of service.

With the new (GUST) prototype, they do have a slot to impose service (and hours) for a period of less than one year. However, there is always the caveat regarding someone who accrues 1,000 hours in a year.

[E as in ERISA]

Yes. I believe that we are saying the same thing!

[jaemmons]

I guess it's six and one half dozen of the other. Sorry for the redundancy.

[actuarysmith]

I think that the problem is cellular static (ha ha). You both need to get Sprint PCS.

[E as in ERISA]

I already have it!