Short Plan Year

[Guest Rosemary Raymer]

According to Sal Tripodi's ERISA Outline Book, when you have a short plan year, for eligibility and vesting you look at hours for the 12 months beginning with the first day of the short plan year per DOL 2530.203-2©. I believe that somewhere in the past I have read that you could also use the 12 months prior to the end of the short plan year, i.e., if the short plan year is from 01/01/2006 through 6/30/2006, you could use hours from 7/1/2005 through 6/30/2006. Has anyone else seen that? Also, what about just putting in the short plan year amendment that anyone with one hour of service in the short plan year is granted a year of service? Anyone seen a PLR, IRS Q&A or anything that would allow either of these? I really don't want to wait 6 months after the end of the SPY to calculate vesting! Thanks.....

[david rigby]

I thought you used both 12-month periods. One YOS for the 1/1/06 thru 12/31/06, and 1 YOS for 7/1/06 thru 6/30/07, assuming the minimum hours requirement has been met. For purposes of participation service and vesting service. Benefit service could be defined otherwise.

Of course, the plan could be more generous than the ERISA minimum.

[Archimage]

That is my recollection as well.

[E as in ERISA]

The regulations say that the first vesting period must begin before the last day of the preceding vesting computation period. But then the example in the regulations says that a plan using calendar year changes to a June 30 year end starting in 1977. Those who complete 1000 hours in both the 1/1/1977 to 12/31/1977 and 7/1/1977 to 6/30/1978 periods get two years of credit.

I thought that in your example you got double credit for the 7/1/2005 to 12/31/2005 period. So your first vesting period of 7/1/2005 to 6/30/2006 begins before the last day of the period period of 1/1/2005 to 12/31/2005. But the example kind of suggests that you get double credit for the 7/1/2006 to 12/31/2006 period. Depending on what they mean by saying the plan is amended to provide for 6/30 vesting "starting in 1977".

[david rigby]

If the short PY ends 06/30/06, then the subsequent 6 months is the "overlap" period.

DOL Reg. 2530.203-2©(1). "...the first vesting computation period established under such amendment..."