1004 hours worked in 2004, paid for 995 in 2004

[Guest 401ksrus]

Calendar year 401(K) Plan has one employee who's payroll records show 995 hours for 2004. The employee called me up and told me that she actually worked 1004 hours in 2004 and wants to start defering. If you subtract the hours worked in 2003 and paid for in 2004 and add the hours worked in 2004 but paid in 2005, the total is 1004.

Is she eligible? yes, no, or it depends on the document. (I can't find anything in the document on this) I think she has to be in. ( For what that's worth)

I would like to hear from other administrators. How much work do you go through to figure this out exactly or do you just go by payroll records? I'm wondering if I should have on my checklist to take a close look at anyone between 980 and 1020 hours. As hard as it is to get census info from some clients this could be a big ...challenge.

[Earl]

I would ask the client "what do you want to do?" Then I would tell the participant, "I asked your boss and you should talk to him." (and get the heck out of the middle of that discussion.)

Certainly, if the owner/hr guy says let her in, I would not have a problem with inclusion. And if excluding her, I would not have a problem showing the payroll record to the IRS in an audit.

[Ron Snyder]

I would review the plan language (whether is says "paid" or "worked" or similar language) and apply it literally. The statute can go either way. Note: I would NOT leave this to the boss' discretion, since failure to operate the plan as written may result in plan disqualification. Only if the plan is silent or too ambiguous to be interpreted clearly can the boss decide how he wants the plan interpreted. Then an amendment (or, in the alternative, an interpretation) should be drafted consistent with the determined result to avoid future problems.