Internal "temporary employee"--ok not to get benefits?

[Guest carma@marconid.com]

I am reviewing a company manual for a construction company. They have an employee classification called "temporary worker", which is defined as "an employee hired with a short-term expectancy of employment (such as an employee hired for the summer)". I'm not finding an official definition for a "temporary worker."

In the company in question "temporary workers" are not eligible for company benefits, even though some stay 7-8 months, then become "regular" employees in the same or a different capacity. Regular employees become eligible for benefits after 90 days.

Is this ok?

[E as in ERISA]

The IRS issued a field directive quite a while ago (maybe 10 years ago?) indicating that employee classifications that are based on hours worked or other time (like part time) could be an impermissible service requirement. (You can't have a minimum service requirement that requires more than 1,000 hours in a year and those time/service related classifications could violate that). I don't remember if they specifically mentioned the temporary classification. But many do not exclude that category anymore for that reason. Sometimes those who are brought on as temporary might be working in a specific unskilled job category that could be used in lieu of the temporary category. Because then its not a service or time related exclusion. Or sometimes there is a safety provision that says if they've been there a year, then they will get in anyway.

[Lori Friedman]

I believe Katherine's referring to IRS Field Directive: Exclusion of part-time employees from plan participation, 11/22/94. The IRS's position is that Sec. 410(b) prohibits employers from excluding part-timers solely on the basis of their part-time status, even if the plan would otherwise satisfy the mechanical coverage tests.

[oriecat]

Is that just for retirement plans, because I would assume the OP was about health insurance plans, since it's in the welfare plan section.

[Ron Snyder]

The answer to the initial question is that it is ok. However, the plan may fail nondiscrimination testing or may be denying workers benefits to which they are entitled (lawsuit hazard).

There needs to be an articulated standard for determining who is and is not a "temporary" employee, and if an employee stays longer than the period given, his or her status is changed.