Year of Service with rehires

[Nate X]

Two part Q:

1. Can I design a plan that makes the participant work 12 consecutive months without being terminated and 1,000 hours before meeting the eligibility requirements even if there is no break in service? The plan would use actual hours worked in determining eligibility.

Example: A calendar year plan with semi-annual entry. Participant A was hired on 2/15/04 terminates on 1/10/05 and gets rehired on 4/20/05. Can I make him/her start the eligibility conditions again, on 4/15/05, or would I be forced to have the participant enter the plan on 7/1/05?

2. If this is no, can I design a plan that makes an employee work 11 consecutive months without being terminated before meeting the eligibility requirements even if the employee worked 1,000 hours during the initial plan year? The plan would have no hours requirement. (apply to the same example above).

[Tom Poje]

410(a)(3) says that as a general rule, a year of service means a 12 months period during which an employee has not less than 1000 hours.

thus, even if the ee has terminated for awhile, as long as he has completed 1000 hours I dont see how you can exclude him under the general rules as long as he is (re)employed by the entry date.

could you get around it by putting in special language to exclude such a person?

well, I suppose so, since you can exclude people by name, etc, then that would be possible. would you have to include such people in testing? yes, as includable and not benefitting if you did indeed exclude them since they met the plans eligibility requirements, which means you could fail coverage

now, why one would want to put in special language (I assume that would increase the cost of the document and all the other hassles associated with that) is beyond me

[Nate X]

Thanks! Just so I'm 100% clear, let me throw in one more example question.

A calender year plan is designed to have an 11 month eligibilty, no hours requirement, and semi-annual entry dates. A participant starts on 1/15/04, terminates on 4/10/04 after working 510 hours, and is rehired on 12/30/04. Would the employee be eligible on 1/1/05? What if the employee terminated on 1/31/04 instead after working 80 hours and was rehired on 12/30/04?

[WDIK]

I would think that it depends on how the 11-month eligibility period is defined in the document.

For example, it could state that an employee must be employed at least one day during each month of the eligibility period to qualify.