Past service at merger

[ombskid]

Sole practitioner is joining large medical group and bringing one employee. Group wants to amend plan to include service with the sole practitioner, making one doc plus one employee immediately eligible in the large group's plan.

Any problems?

[Guest Sieve]

If it's a DC plan, then it's OK.

[JanetM]

Done all the time for vesting purposes. Doesn't cost anything - why not?

[david rigby]

Doesn't cost anything - why not?

There is no free lunch. It might have a cost. But probably not much.

[masteff]

The cost of immediate eligiblity from bridged service is immediate match and profit share, to the extent the plan offers them.

[JanetM]

The dollar cost of match/profit sharing is usually recouped by the goodwill, lower turnover, and happy workforce after a merger/acquisition. My employer buys and sells 3 or 4 companies a year. One acquisition we did that didn't offer credit for prior service was a disaster. Voluntary turnover went from 5% to near 60%. So instead of being profitable from day one for small expense, the company struggled for 2 years.

[masteff]

Thanks for adding that Janet... I had the thought but failed to express it that a company may have very valid reasons from a compensation perspective to provide bridged service.

The same can apply to vacation and, in some companies, service awards.

[ombskid]

Thanks for the responses.

Could an amendment like that work if only the sole practitioner came - no ee's. In other words, can such an amendment only benefit HCE's?

[JanetM]

If only one person it could. But if you are going to give Dr. service credit and there is an employee at his practice I say you can't.