1.5 years eligibility requirement

[ombskid]

A prototype document did not have multiple entry dates or a number of months of service for eligiblity so a sponsor used 1.5 years. I haven't seen that - fractional years - and although it seems workable, does anyone see anything inherently wrong with it?

[himt4]

not sure I understand the situation. They used 1.5 years waiting period for eligibility, and then entry was exact date that waiting period ended? So if someone was hired 2/17/05, they entered the 8/17/06?

[ombskid]

Sorry. Entry date is first day of the year nearest completion of 1.5 years of service

[rcline46]

Standardized or non-standardized prototype? Also look carefully at the adoption agreement because many of them state what the default will be if no choice is made.

[himt4]

"Entry date is first day of the year nearest completion of 1.5 years of service"

so if someone was hired 2/17/05, they wouldn't enter until 1/1/07?

I don't think that's ok. My understanding is that there is a rule out there that essentially says you cant keep eligible people out of the plan longer than a year and a half after their hire date (unless you're doing the 2 year/ 100% vesting thing). The above example person would be forced to wait 1 year 10 months and 15 days.

[ombskid]

"Entry date is first day of the year nearest completion of 1.5 years of service"

so if someone was hired 2/17/05, they wouldn't enter until 1/1/07?

I don't think that's ok. My understanding is that there is a rule out there that essentially says you cant keep eligible people out of the plan longer than a year and a half after their hire date (unless you're doing the 2 year/ 100% vesting thing). The above example person would be forced to wait 1 year 10 months and 15 days.

And if they are immediately vested?

[Jim Norman]

And if they are immediately vested?

Assuming the document language works, I think it is OK if they are fully vested. See 410(a), 2 YOS substitutes for 1 YOS. So just like you can have a plan with a 6 month wait because it does not exceed 1 YOS, with full vesting you can have 18 months because it does not exceed 2 YOS.

I have not done this, so haven't looked at the regs for this issue to see if they create a problem, just commenting based on what 410(a) say.

[Jim Chad]

This is either a profit sharing or Money Purchase, right? It would not be legal if it was a 401(k) Plan.