Rehires

[Guest andmik]

Former participant in a P/S Only Plan (10 years ago it was only a P/S Plan, now it is a 401(K) Plan as well) was 0% vested in his P/S account balance when he terminated. Entire account balance was forfeited per document at the time of termination.

Now the participant has been rehired 10 years after original termination. Per document it seems that the 0% vesting along with having been gone for more than 5 years (5 consecutive breaks-in-service) creates a situation where former participant is treated as a new employee and must serve the eligibility period all over again.

Vesting seems to be the issue that needs some feedback. The 10 year gap period clearly restricts the use of post-break service from being credited to pre-break service, but as we read the document it appears that there is nothing that prevents the pre-break service (two vesting years of service) from being included in post-break vesting calculation going forward. Thus, he will begin with vesting service of 2 years and move forward upon rehire.

With regard to the pre-break vesting service crediting, does this sound like a likely treatment given the fact pattern above?

Thank you for any feedback and insight.

[JanetM]

This will only work if you record keeping system can handle all the different dates and such. Most systems will take difference in DOH and todays date or DOT to calc eligibility and vesting. You can't use ODOH or you will give credit for prebreak and break.

I recommend fixing the document to prevent the pre break being added to post break for vesting.

[ERISAnut]

This needs to be broken down into two distinct issues:

1) Rules of parity for zero vested participants. You lose everything. All service (both vesting years and eligibility) if the document applies such rules.

2) Everything else. Say you were 20 vested when you terminated. Then, you lose your forfeiture after 5 consecutive one year breaks, but you never lose the vesting percentage since you were not zero vested. Even though you do not get a redeposit after 10 years, you are still 20% vested. Notice, this is different from "1" above.

[Kevin C]

You will have to look to the plan document provisions for your answer. As noted, the plan could have been written to completely exclude the pre-break service in this situation. But, it was not required to do so.

For example, the GUST prototypes we use allow you the option to exclude pre-break service for certain non-vested terms under the rule of parity only for determining vesting of the pre-break balance. But, it requires that all years of service apply to vesting of post-break accruals and all years of service apply for determining eligibility.