Early Eligibility for Full-Time, 1 Year for Part-time

[rocknrolls2]

Does anyone have any thoughts on whether a plan can permit employees normally scheduled to work 1,000 hours in a year to become eligible after 30-60 days of employment, but require those who are not regularly scheduled to work at least 1,000 hours to actually complete 1,000 hours? I have recently come across these situations in a couple of plans where clients want to do this. Any views on this issue would be sincerely appreciated.

[Guest Jim Schmidt]

I am by no means an expert on this, but I seem to recall that you cannot base your eligibility on a classification of part time vs. full time. You could, however, allow all employees to participate in the Plan after 30 or 60 days, but still require 1,000 hours before they receive a matching contribution. This way, your part-timers get to defer if they want to, but they will not receive the match unless they work 1,000 hours. I think that the change in ADP/ACP testing has made this a more viable alternative.

I would check with your consultant or plan provider to be sure.

[rocknrolls2]

Jim, I understand your point. My understanding of the IRS concern dealt with excluding people not normally scheduled to work 1,000 who actually work 1,000 hours. The proposed scheme would not exclude them but would require them to complete 1,000 hours before they could defer.

[Disco Stu]

I have a plan that I administer that uses exactly that language to accomplish that goal. I'd have to check my files to be sure, but I'm almost positive that they got a favorable determination letter on the plan.

[Guest]

I guess I don't see what the problem is. There is no requirement that a plan must use the same eligibility restrictions for all employees (just like a plan can use different vesting schedules, different methods of crediting service, etc.). As long as the eligibility restrictions are no more onerous than the ERISA maximums, why is this a problem? This would presumably be a feature of the plan subject to discrimination testing (but unlikely to be a real problem for larger employers).

[rocknrolls2]

Thanks Disco Stu and Harry O! My gut feeling was that, subject to testing, this arrangement would work, given that part-time employees would not be required to be excluded past the statutory minimum. I just wanted to bounce it off you to be sure I hadn't missed anything. Again, thank you for your input on this.