3% SH for termed participant who returned for 2 weeks following two ye

[Cathy from Chicago]

Participant terminated in Oct. of '00; In January '01 she returned part-time for 2 weeks and received a W-2 for earnings and received a SH 3% contribution for the year. She took her entire distribution in '02. Again, her W-2 for '02 shows she had minute earnings for another part-time two week gig in Janauary...obviously this appears to be an ongoing thing. Question...does the employer have to continue to give her the 3% as long as she receives W-2 earnings? Could she just be 1099'd for her work? She no longer has her 401(k) investment account since taking her distribution last year. Thanks in advance.

[Blinky the 3-eyed Fish]

You could add a BIS feature to the plan. Then she wouldn't be eligible when she returns for only 2 weeks. Of course, I never like having a BIS feature in a 401(k) plan.

As far as 1099'ing her, I am not an accountant, but I didn't think that was allowable unless she truly is an independent contractor.