Use of Fractional Year

[chris]

I'm reviewing a prototype doc where plan year and employer's fiscal year is Nov 1 - Oct 31. The adoption agreement provides for a fractional year of service of 10/12 with respect to eligibility/participation. I haven't run across the use of a fractional year before. Can anyone give me some background on when/why a fractional might be used? Thanks.

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[david rigby]

Is it possible that the plan was originally effective on January 1 with an initial plan year of 10 months?

Or some other change to the plan year?

[chris]

From a review of the adoption agreement for the prototype as well as corporate minutes from 79-80, the plan was initially effective Nov 1, 1979.

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[Bill Berke]

I agree with PAX - something is strange to have a 10/12 year. Usually, as PAX said, this has something to do with eligility in the first year. If not obvious, you must investigate. And we use 6 months eligibility first day following entry for most of our small plans. There are lots of reasons to use reduced requirements all relating to eligibility or appropriate planning. For example we have a client with lots of parttimers who employer wishes to cover. So we had to reduce 1000 hours and eligibity to conform to employer's goals.

[This message has been edited by Bill Berke (edited 05-08-2000).]