Minimum Service Requirements

[Guest newbee]

A prototype PS plan provides that the one-year holdback rule and the Rule of Parity do not apply, which essentially means that the plan has no break in service rules. The plan also switches to the plan year for subsequent eligibility computation periods. Plan entry dates are July 1 and January 1. What if:

(a) An employee starts work on April 1, Year 1, earns 1,200 hours of service, and then quits December 15, Year 1. The employee returns to work on August 15, Year 2. This is how I think the minimum service rules would apply: Because the employee earned at least 1,000 hours of service during his initial eligibility computation period (April 1 - March 30), his normal entry date would have been July 1, Year 2. The employee should be permitted to begin participating immediately upon his return on August 15, Year 2.

(b) Same as above, except the employee only earns 800 hours of service from April 1 to December 15, Year 1. Because the employee did not earn at least 1,000 hours of service during his initial eligibility computation period, he is not entitled to participate immediately upon his return on August 15, Year 2. When he returns, he has to start over. Question: what is the eligibility computation period when the employee returns? Is it the 12-month period beginning on his reemployment date, or is he now on the calendar year when he returns? Note that the break in service regulations provide for another initial eligibility computation period for employees rehired after a break in service beginning on their reemployment commencement date. However, since the plan has effectively waived application of the break in service rules, it would appear that this rule would no longer apply.

[Blinky the 3-eyed Fish]

(a) agree

(b) It depends on how the plan measures the eligibility period subsequent to the first eligibility period. Generally, while the first eligibility period must be measured from date of hire, the subsequent period can continue to be anniversaries of date of hire or switch to the plan year. So, the answer is the subsequent period will be April - March or Jan - Dec.