Pre-ERISA service issue

[chris]

Client terminated employment with hospital early in 1974 after 17 years of service. Client rehired mid- 1976 and then terminated mid 1979. HR department says client is not entitled to anything because client was: 1) not 55 years old and 2) did not have 10 years of service at date of termination in 1979.

I've requested copies of SPD's and plan doc's for the requisite years. DB plan was amended effective Jan 1, 1976 (I assume to comply with ERISA/IRC requirements). The plan doc as of Jan 1, 1976 says that credited service prior to Jan 1, 1976 shall be computed under the terms of the plan in effect prior to jan 1, 1976. That plan doc is silent on breaks in service other than to say that an authorized leave of absence is not to be considered termination of employment under the plan.

SPD for plan doc effective Jan 1, 1976 says that employees who terminate with 10 years of service or more will be entitled to 100% of their accrued benefit. That short paragraph comes right after the paragraph which says that if you terminate employment before you are eligible under the plan and before you are vested, you get nothing. Of course, SPD's final paragraph states that it is not a contract and provisions in the plan trump anything in the SPD.

If prior service could be counted, then client definitely has 10 years of service. Client however was 44 years old at date of termination in 1979. So, it may be that client's not entitled to anything. It just doesn't sound right that an employee can work for almost twenty years for one employer and then not be entitled to anything in the DB plan because the e/ee wasn't 55 at the date employee terminated employment. I work mostly with DC plans so maybe that's why it doesn't seem to fit.

After looking at this issue I ran across Reg. §1.411(a)-5(b)(5) which says that pre-1971 service cannot be disregarded for vesting purposes if the participant has at least three years of service post 1971. Pursuant to language in the Reg. this trumps the §411(a)(4)(F) provision regarding pre-ERISA break in service rules. Thus, in the client's situation, it appears client has 10 years of service which would entitle client to 100% vesting.

Anyone dealt with this issue or dealt with Reg. §1.411(a)-5(b)(5) before???

------------------