Eligibility cutoff point

[John A]

Plan year 7/15/99-6/14/00. All employees meet hours requirement in first 12 months of employment. All employees are over 21. Employee A hired 7/14/98. Employee B hired 7/15/98. Employee C hired 7/16/98. Employee D hired 7/17/98. What are the latest entry dates possible under 410(a)(4) (assume plan document is written to provide for latest possible entry dates)?

[Guest ptpnthr]

Assuming they meet the eligibility requirements after they have served 1,000 hours in a 12 consecutive month period beginning from their employment commencement date and are otherwise eligible to participate in the plan, and assuming a plan year end of 7/14, the answers are as follows:

A. 7/15/99. This employee clearly satisfied the eligibility requirement by 7/14.

B. 7/15/99. This employee satisfied the eligibility requirement on 7/14/99.

C. 01/15/99. This employee satisfied the requirement on 7/15/99. Be careful, if the plan says the entry date is the date "on or after" the employee satisfies the eligibility requirement, you have to consider that this employee satisfied the year of service requirement "on" 07/15/99. I realize that goes against the facts you gave, but it is an issue to consider.

D. 01/15/99. This employee satisfied the requirements on 07/16/99.

Also watch out for rehires, predecessor service, controlled groups, leased employees, ASGs, etc.

[Guest]

you can get into some 'gray' areas when discussing entry dates as such.

certainly the document may address the issue, if it doesn't, it might just depend on the logic you are using...

e.g. 'inclusive' or 'exclusive' logic.

for example, the ee hired 7/16. Inclusive logic would say 12 months is up on 7/15 and ee would enter that day.

exclusive logic would say a full 12 months is completed on 7/16. I don't think the regs ever said which logic you had to use.

as for latest entry, if you were following the regs to the letter, it appears your plan could have

365/2 entry dates, to exclude ees to the maximum. An ee must enter on the first day of the plan year follwoing completion of 12 months, or the day 6 months after completion of 12 months. so the longest an employee could be kept out is 18 months, but it might be only 12 months depending on date of hire and first plan entry date. all this assumes the ee has completed 1000 hours during his 12 month measuring period.

[david rigby]

This is probably not what you have in mind, but don't forget IRC 410(a)(1)(b), where you can use a 2-year eligibility period if you give 100% immediate vesting.

[John A]

Thanks, ptpnthr, you answered the question I was trying to ask, but I assume you meant 1/15/00 for C. and D.?

Tom, are you saying that 'inclusive' logic would result in the answers: B. 7/15/99 (12 months is up 7/14) and C. 1/15/00 (12 months is up 7/15) and 'exclusive' logic would result in the answers: B. 1/15/00 (12 months is up 7/15) and C. 1/15/00 (12 months is up 7/16)? Do you normally use 'inclusive' or 'exclusive' logic?

I guess my example question was trying to get at the questions:

1. On what date is "the date on which he completes 1 year of service" considered to have occurred?

2. What is "the date 6 months after the date on which he satisfied such requirements"?

3. On what date is an employee considered to have "satisfied such (the eligibility) requirements"?

4. While many plan documents read "on or after", is it acceptable for a document to read "after"?

The questions actually arose from a plan with a 6-month entry requirement that only provided the first day of the plan year as an entry date. The plan provides that "An Employee must have completed 6 months of Service with the Employer prior to an Entry Date". The employee was hired 1/15/99 and 7/15/99 was the first day of the plan year (and only Entry date). We are trying to determine if this employee has to enter on 7/15/99 or can't enter until 7/15/00. I was trying to get at an answer partially by trying to determine if the latest this employee could enter under 410(a)(4) was 7/14/00 or 7/15/00. Any thoughts?

pax, I appreciate the input, but as you thought, the 2-year eligibility was not what I had in mind.

BTW, I did find it interesting in doing my own research that a 12-month eligibility computation period could be a 52 or 53 week period such as "the 52 or 53 week period starting on the first day after the last Friday in August and ending on the last Friday of the following August" without violating the eligibility requirements.

Any additional thoughts on this would be appreciated. Thanks.