Deferrals for Part-Time Employees

[Guest JCONNER]

I am working on a plan in which one of the employees went from full-time to part-time work. She was a participant in the plan, then she quit for about 4 months, and now she works once or twice each month if needed. Because she was a participant and did not incur a break-in-service, can she still defer? If she defers now (the document does not specify a minimum number of hours that have to be worked after the 1000 hour eligibility requirement has been met) will she incur 5 breaks in service after 5 years and then have to stop deferring? Please Help!

[Larry M]

Seems as if the document (and law) require the plan to accept deferrals from a part time employee once original participation has been met.

A question is whether the document requires the employer to include that participant in the group of those who get matching contributions or ordinary profit sharing allocations.

[This message has been edited by Larry M (edited 10-23-98).]

[Guest Laura]

The sponsor must continue to treat the employee as a participant despite his status as a part-time employee.

Once the employee meets the age and service requirement(s) for participation, the employee becomes a participant. The plan cannot impose an additional service condition for on-going participation in 401(k). However, a sponsor may add an ongoing 1,000 hour condition to receive an allocation of match and profit-sharing. This would have to be in the plan document.

Note that part-time status is not treated as a job classification in the conventional sense. Take, for example, a plan excludes clerical staff. If a non-clerical employee becomes a participant in that plan and then becomes a clerk, it would be permissable to eject that employee from the plan. Part-time status, by contrast, is treated as a service related status. Accordingly, the rules are more restrictive, as described above.