Foreign employee moving to US gets service credit?

[Guest FAQ]

A company with foreign subsidiaries has a 401(k) that excludes nonresident aliens with no US-source income. A foreign employee is moving to the US and will have US-source income. He will be eligible for the 401(k) after relocating.

The question I have is will he receive service credit for his time with the overseas subsidiary, for participation and vesting purposes? (There is a 90-day eligibility period for the plan, and a vesting schedule for matching contributions.)

The minimum participation standards at Code §410 and ERISA §202 refer only to "employees." ERISA's definition of employee does not differentiate between US or foreign status. Code §411(a)(4) allows certain service to be excluded for vesting purposes (such as service prior to age 18), but does not mention nonresident aliens.

I suspect that service by the nonresident alien while working for the overseas subsidiary will count for participation and vesting purposes, but I am not familiar with foreign employee issues and am concerned that I might be missing something.

Thanks in advance for any thoughts.

[Bob R]

I agree - all the service counts. There is nothing permitting you to exclude the service with a foreign subsidiary.