Rehires

[Guest carsca]

A Company sponsors a Profit Sharing Plan that provides employees are eligible after two years of service (under the 1,000 hours of service rule, based on employment computation years) and quarterly entry dates. My question: how far can the Company go in excluding service for rehires?

Specifically, what if an employee was hired 2/1/2000 and left the Company 12/31/2001. This employee should have one year of service for each of the computation periods 2/1/2000-1/31/2001 and 2/1/2001-1/31/2002. However, the employee never entered the plan.

If the employee returns to the Company before incurring a one year break in service, I think all service must be counted (although I have a question as to whether the plan must let the employee in immediately, or wait until the next entry date).

However, what if the employee has a one year break in service (plus) and only returns in 2004: Can the plan provide that it will ignore the prior service? I know Section 410 permits a plan to ignore service for this plan if the employee incurs a one year BIS. But, is that rule inapplicable once the employee completes 2 years of service? Or, does the rule apply because the employee never entered the plan?

The language in the regs is somewhat ambiguous, and I would appreciate any definitive answers. Thanks in advance!

(I realize that, in reality, the answer would be governed by the plan document, but I would still like to know the answer from an IRC perspective.)