Re-entry into new 401(k)

[Guest amybu99]

Client has EE that left in late 2001 and was rehired in early 2003. Only one break in service occurred. Plan has 1 yr. hold out rule for rehires. The EE never worked 1000 hours in 2003, 2004, 2005 but will probably work their 1000 in 2006. Now, the plan was amended from a profit sharing to a 401(k) effective 1/1/06. If EE works 1000 hours in 2006 they should be re-entered retroactively on 1/1/06 but its a 401(k) at that point. I don't want to tell them that the EE is a participant eff. 1/1/06 and then find out that they didn't work 1000 hours. Any suggestions as to how to handle the re-entry date?

Thanks!

[stephen]

This is why you should not have a 401(k) plan with retroactive entry dates...

[E as in ERISA]

You can't have retroactive entry on the 401(k). But there are a couple of ways this could be handled. Ideally the plan document would spell out what approach to take. One alternative is to apply the one-year break and retroactive entry only to other contributions. So 401(k) could begin immediately upon rehire (or start of the 401(k). Another alternative is that once the 1,000 is met during the year then the participant enters immediately.