using 500 hours for eligibility & vesting

[betheeg]

i have always used 1000 hours for eligibility, vesting (year of service). i have a new client that has many part time ee's she wants to cover. is there anything wrong with using less than 1000 hours? i would think it is ok but wanted to double check first in case there is anything i am missing. thanks.

[david rigby]

OK to be more generous than the law allows in this area. Might be some business and/or benefit planning reasons not to do this, though.

[g8r]

It's fairly common to see something less than 1,000 hours used. In fact, many prototype plans allow you to do this in the adoption agreement. You would also need to make sure there is a corresponding change to the definition of a 1-year break in service (e.g., many plans provide that a 1 year break is 1/2 the hours needed for a year of service.

[E as in ERISA]

Just remember that you still have to use a 12 month period if you use an "hours method." (I.e., you can't reduce it to six months and 500 hours -- because if you use less than 12 months then you are on the "elapsed time method" and anyone with six months would qualify).

[Mike Preston]

Actually, Katherine, I think you can use a two tier system. Something like the earlier of 1000 hours in a 12 month period or 500 hours in a 6 month period would work. At least, I've seen a whole lot of approved documents with that type of dual eligibility provision.