Eligibility for rehired employees

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Has anyone ever heard of a plan basing a rehired employee's eligibility on whether they still maintain a balance in the plan from their prior service? The document states that BIS rules do not apply to eligibility.

Background: two EEs worked 1+ YOS for ER and terminated. ER merged into a new company, with a new profit sharing plan that requires 1 YOS for a PS contribution. The EEs are rehired after the merger so they have no prior service with the new ER, but they had both been eligible for the former ER's 401k, which has since been merged into the new ER's plan. New ER counts their prior service for vesting but determines that only one of them is eligible to receive the current PS allocation.

Because one of the EEs still had money in her account from her prior tenure, she was deemed an existing "participant" and given a prorated share of the PS contribution for the year of rehire. The other employee had either not contributed previously or had already taken distribution of her account so she did not have a current balance in the ER's plan when she was rehired. Because of this, the new ER determined that she was not a former participant of the plan and is requiring her to complete a new YOS.