vesting

[Lori H]

Example: Plan is calendar year. Employee hired 7/28/04. First year of service is 7/28/05 and while hours worked from 7/28/04 - 12/31/04 on the year end census show 980, we assume the participant is full time and by 7/28/05 will have worked 1000 hours and is credited with 1 year of service. Now for the second year of service, is it ok to switch to the plan year, meaning 1/1/05 - 12/31/05, to determine the second year of service, basically using nearly 8 months(1/1-7/28) of service twice, OR should the second year just be determined from 7/28 - 12/31/05 and years of service thereafter follows calendar year

[rcline46]

Lori, first you must determine what the document says is the computation period for year of service for vesting. Generally you will have 2 choices - Plan year basis (and 1000 hours) or elapsed time.

If the plan uses plan year of service - then in your case, the period of 7/28-12/31 will not count because it is under 1000 hours (unless the plan uses a lesser hour count).

If the plan uses elapsed time, then it must be counted on an employment year basis and hours don't count at all.

The 'switch' you are thinking of only applies to eligbility.

[Tom Poje]

unclear what you are really asking. (since you indicated hours, I assume this is not elapsed time.

there are 2 issues - servide for eligibility, and service for vesting.

in 04 person did not work 1000 hours so 0 yrs for vesting.

in 05 worked 1000 hours so at the end of 05 1 yr of service.

now, eligibility. 7/28/04 - 7/28/05 person worked 1000 hours, so if plan has 1 yr svc requirement then that has been satisfied, person enters on next entry date.

if plan has 2 yrs svc requirement, then it depends on what the document says. most documents switch to plan year in the person's second year, in which case the ee would complete a 2nd yr by 12/31/05. yes, you do end up counting hours twice for eligibility in this particular case.

[Lori H]

thanks. it IS years of service, not elapsed time.