Defined Cont Plan: Does 500 hour rule begin before eligibility starts?

[Moe Howard]

Per adoption agreement.

1. Calendar year PSP (Standardized Plan)

2. Eligibility requirements = 1 year & 1000 hours

3. Entry dates allowed = 1/1 and 7/1

4. Must receive allocation in employment termination year .... if worked 500 hours during plan year or employed on last day of plan year.

An employee was hired on 4/1/07 and then worked well over 1000 hr during eligibility period (4/1/07 - 3/31/08).

The employee entered the plan on 7/01/08.

The employee quit on 8/ 10/08.

During the period 1/10/8 - 8/10/05, he worked 1,160 hours.

But during the period 7/01/08 - 8/10/08, he only worked only 200 hours.

Now, here are my questions:

In order to be allocated some of the 2008 PSP contribution .... does he have to have worked 500 hours during the period 1/10/8 - 8/10/08 ? Or during the period 7/01/08 - 8/10/08 ?

[Guest Sieve]

During the plan year (which, from your facts, appears to be 1/1-12/31)--or, in this individual's case, 1/1/08-8/10/08 (although your dates are a bit convoluted).

[Moe Howard]

Sieve, thanks.

So, since he enterd the plan in 2008 and worked more than 500 hours during calendar year 2008 ... then he must share in the allocation of the 2008 PSP contribution, even though he worked less than 500 hours during 2008 while being a participant.

OK, I understand now.

[Guest Sieve]

Based on your facts, that is correct. Of course, the plan could have been designed to require a full year of service in 2008 to receive the allocation (rather than just 500 hours)--although your employee met that requriement, as well--and could also have required end-of-year employment.