Quick Eligibility Question

[Guest carsonv]

I have a 401(k) plan with 3 months service eligibility, no hours or age requirement. Entry dates are 1st of the month coinciding with or next following the date on which an employee meets the eligibility requirements.

Here is the situation: I have 6 participants who were hired on 02/02/2004. I always thought they would enter 06/01/2004, but relius is giving them an entry date of 05/01/2004.

I have heard arguments for both, but I wanted to hear some others thoughts. Is there any reg or IRS Q&A that might clear this up? I have looked in The ERISA outline book, but I can't find an example.

Any thoughts would be appreciated.

Thanks,

Carson Vaughan

[Lame Duck]

IMHO, Relius is correct. If you consider a month to be the period from 1/1 to 1/31, a month would also be 1/2 to 2/1. Since 2/1 is the first day of the month, that would be the entry date since it is coincident with the completion of a month of service.

[Tom Poje]

this should depend on how you answered waiting period 'inclusive' or 'exclusive'

one would give you a 5/1 entry, the other would give you a 6/1 entry date

I think as long as you are consistent, then it is up to you...er...your boss, how to handle

[Guest carsonv]

I appreciate the input,

Have a good weekend.

Carson

[austin3515]

Tom -

Off hand, do you know which box gets which result?

I'm assuming Inclusive means 5/1 and exclusive means 6/1?

[Kirk Maldonado]

carsonv:

Have you considered the possibility that by only having a length of service requirement, but no hours component, that the plan is using the elapsed time method of crediting service, rather than the 1000 hours method?

This is a problem that I've seen many times (where the plan only has the 1000 hours method language contained in it).

[Tom Poje]

austin -

what is really sad is I can never remember without looking it up.

I just finished my crystal report that shows plan passes ADP test after refund under old rules along side the actual refund due to leveling (I have always read you would never have proof, but that is a bunch of...)

anyway, the description if the help notes is:

Waiting Period Exclusive: Would only affect employees hired the day after an entry date. Example: 12 months wait, quarterly entry, 2002 calendar year plan. Employee hired 4/2/01. If the box is checked, employee enters 7/1/02. If not checked, employee would enter 4/1/02.

Copyright © 2003-2004 SunGard Corbel (Relius Administration Help 9.1)

interesting, you copy it and the extra little copyright comes along with it.

[jquazza]

Tom,

I don't think you have discretion here, if the plan doc says "coinciding with", then you should check the inclusive box.

[AndyH]

Tom, have you considered that you might go to jail for copying something that has a secret copyright message embedded into it and then admitting it to all of us?

SWHT

[Blinky the 3-eyed Fish]

Jquazza, I disagree because you can argue two sides to which is correct. Going back to Lame Duck's post:

If you consider a month to be the period from 1/1 to 1/31, a month would also be 1/2 to 2/1. Since 2/1 is the first day of the month, that would be the entry date since it is coincident with the completion of a month of service.

I can argue that he doesn't satisfy the month of service until the instantaneous moment AFTER 2/1 is finished, thus he enters 3/1. At no time on 2/1 has he fully completed the month of service. It is not until that last day is over that the requirement is completed.

Andy, you forgot about Willie.

[austin3515]

I think use of the word "coincident with" makes the intentions clear enough though, doesn't it?

The month of service is completed at 11:59.99999, which is still 2/1 which is coincident with an entry date. The month certainly isn't completed the next day? Would it be wise to kick a participant out of the plan based on a nanosecond?

[Blinky the 3-eyed Fish]

The fact that you say the service is completed at 11:59.9999999999 means that is completed at 12:00.00000. Consider a parallel argument of a simple mathematical principal.

What is 1/3? Answer 0.3333333333333333333333333333333. What is 3 * 0.333333333333333333333333333333? Answer 0.99999999999999999999999999999? No, the answer is 1. Thus 0.999999999999999999 to infinity is equal to 1.

Don't you love math?

[austin3515]

I would like to point out that this was supposed to be a "quick eligibility question." I find that amusing given the lack of agreement on the most basic of retirement plan questions...

[Blinky the 3-eyed Fish]

You can't argue with my math though. 11:59.99999999 to infinity is the same as 12:00.00000000. C'mon, admit it!

[jquazza]

Jeez Blinky, you must have a really big calculator to make these types of computations.... I thought mine was big because it had 12 digits.

[david rigby]

Size matters.

[Kirk Maldonado]

Don't you mean size counts? (Pun intended.)

Sorry about that, but it is hard to inject humor into some postings by number-crunchers. Or tax lawyers, for that matter.

[GBurns]

Who knows for some people maybe ever little digit counts, while some others are able to extend the outcome.