Trying to exclude seasonal employees

[PMC]

New start-up plan. Employer employs a number of seasonal employees. Generally hires them in March and then lets them go in October. They complete 1000 hours of service during that period. The employer then re-hires most of those same individuals back the next March.

Those employees hired back will have completed a year of service so a year of service for eligibility won't keep them out.

Have thought about reducing the eligibility service requirement from 1 year to 6 months and just one entry date (January 1) which would keep employees out since they wouldn't be employed on the entry date (1-1) BUT for those have completed a year of service (which is most) and are re-hired the next March, they will become eligible as of their date of re-employment regardless of the plan's entry date.

Plan won't pass coverage using ratio percentage test but haven't reviewed for ABT.

Any suggestions on how you may have dealt with these seasonal situations? Thanks

[rcline46]

There is no way to keep them out. DO 401k with SH match - 200 to 6, provide notices but don't push the k for the seasonal ees.

Or do auto-enrollment, delayed pay outs (yr or somethng).

[Guest facade]

New start-up plan. Employer employs a number of seasonal employees. Generally hires them in March and then lets them go in October. They complete 1000 hours of service during that period. The employer then re-hires most of those same individuals back the next March.

Those employees hired back will have completed a year of service so a year of service for eligibility won't keep them out.

Have thought about reducing the eligibility service requirement from 1 year to 6 months and just one entry date (January 1) which would keep employees out since they wouldn't be employed on the entry date (1-1) BUT for those have completed a year of service (which is most) and are re-hired the next March, they will become eligible as of their date of re-employment regardless of the plan's entry date.

Plan won't pass coverage using ratio percentage test but haven't reviewed for ABT.

Any suggestions on how you may have dealt with these seasonal situations? Thanks

A QSLOB, if possible, can fix this. Otherwise you are stuck covering them. You can exclude anyone from your plan that you want so long as you can pass testing. There is no way, other then a QSLOB, to legitimately exclude these employees from your testing group.

[jpod]

It is not exactly true that you can exclude anyone as long as you pass coverage. I think excluding seasonal employees might be a violation of 410(a).

[Locust]

You can exclude them on some classification other than "seasonal" if there is such a class. For example, maybe they are field workers that are employed only in season - you could exclude all field workers. This works only if the Plan meets the coverage rules with the exclusions.

[Guest Gompers]

You might want to look ath this link:

http://www.cyberisa.com/erisa_book_chapter2.htm

to a free chapter from Sal's book--in particluar this Part

Part E., Age or service conditions disguised as job category exclusions are prohibited

[Guest mrjones]

Have thought about reducing the eligibility service requirement from 1 year to 6 months and just one entry date (January 1) which would keep employees out since they wouldn't be employed on the entry date (1-1) BUT for those have completed a year of service (which is most) and are re-hired the next March, they will become eligible as of their date of re-employment regardless of the plan's entry date.

Doing this will violate §1.410(a)-4(b)(1). Participation must commence no later than the earlier of:

1) the first day of the plan year after age/service requirements are met, or

2) the date six months after age/service requirements are met

This is why plans typically have two or more entry dates.

[Kevin C]

mrjones,

The age/service requirements referred to in your cite are the requirements specified in 1.410(a)-3, not those specified in the plan.

6 months of service (or less) and entry on the first day of the plan year is a fairly common provision. If you require more than 6 months of service, then you must have at least semi-annual entry dates.