Eligbility for rehire

[PFranckowiak]

I had what I thought was a simple eligibility question. My boss and I disagree on the answer. I have looked the answer up in various locations and have different interpretations. I would appreciate any thoughts and references.

Corbel Prototype Calendar year plan. Switches to Calendar year for svc, 1 year svc. 1/1 7/1 entry dates.

Hired 8/15/08

Terminated 4/15/09

rehired 4/21/2010

1st computation Period 8/15/08-8/15/09 over 1000 hours, but did not complete 12 months of service.

2009 worked less than 500 hours

Was gone over 12 months.

I have read the document and I am looking at sections that say "rehired Eligible Employee who satisfied eligibility" He satisfied the 1000 hour requirement, but not the 12 months or doesn't that matter.

The other section said Rehired Employee who had not satisfied eligibility.

Would appreciate opinions.

Eligibility is getting more complicated these days with lay offs and rehires.

Thanks for your help

Pat

[pmacduff]

We use Corbel docs as well. FWIW, I believe the participant did not satisfy the initial eligibility...i.e. met the 1000 hours but did not met the 12 months of service.

I say the participant starts over beginning on 04/21/2010.

I checked a Plan Doc here and the one I chose says that initial eligibiliy is 1 'year of service', 'year of service' is then defined as a "computation period over 1000 hours". The computation period for eligibilty is defined as the participant's initial 12 months of service and then switched to the plan year.

my 2 cents.

[PLAN MAN]

Generally, an employee does not have to be employed for the full 12 months to receive credit for a year of service. The employee does not even have to be employed on the last day of the period to receive credit for a year of service. The 12 months describes the time period over which the employee must be credited with 1,000 or more hours of service. Under this situation the employee satisfied the service requirement because they were credited with 1,000 hours in their initial eligibility computation period. However, the employee did not enter the plan, because they were not employed on their entry date of 1/1/2010.

Upon the employee's rehire you must look to see if the plan disregards any eligibility service under the break-in-service rules. How may hours did the employee receive credit for in the 2009 plan year? If the employee did not have a break-in-service then they would enter the plan upon their rehire date.

[austin3515]

Disregarding service under the rule of parity applies to PARTICIPANTS only, not employees. Check the language on disregarding service, you'll note that it specidcially talks about disregarding the service of a Participant. So the service would NOT be disregarded. Everything else PlanMan says is on the money. The Corbel document says (I believie because it is required) that you must work 1,000 hours in 12 consective months. That is all it says.

Very common confusion, in fact I had this question come up just lack week. I looked it up in the EOB and what PlanMan and I say is waht Sal says.

This is not an opinion - it is a fact Not sure who wins the bet, but congratulations to one of you!

[Tom Poje]

the accudraft documents define different situations

reemployment before break in svc, before eligibiility

reemployment before break in svc, after eligibiility satisfied but prior to entry date

reemploment before break in svc

reemployment after a break and before entry date, which sounds like your situation

(g) Reemployment of an Employee After a Break In Service and Before the Entry Date. For any Plan Year in which the eligibility requirements in Section 2.1 are based on Years of Service, if an Employee Terminates Employment with the Employer either prior to or after satisfying the eligibility requirements in Section 2.1 (but before the Employee's Entry Date in Section 2.1) and the Employee is subsequently reemployed by the Employer after incurring a Break in Service, then the Employee's Years of Service that were completed prior to the Break in Service will be recognized, subject to the following provisions:

[the provision listed being whether the plan is using the one year holdout rule or rule of parity - most likely rule of parity if its a 401k because you can't retroactively let someone defer].

(1) Determination of Years of Service for Eligibility Using the Rule of Parity. The following provisions apply to determining Years of Service for eligibility purposes:

(A) One Year Holdout Rule. Any Years of Service completed prior to an Employee's Break(s) in Service will not be counted in determining an Employee's eligibility to participate in the Plan until the Employee satisfies the One Year Holdout Rule. If the Employee has not satisfied the eligibility requirements in Section 2.1 as of the Employee's Reemployment Commencement Date and then satisfies the One Year Holdout Rule, then the Employee will become a Participant in the Plan as of the Entry Date in Section 2.1 after the Employee has satisfied the eligibility requirements in Section 2.1 (including, if applicable, an Entry Date that may occur during the One Year Holdout Rule period after the Employee's Reemployment Commencement Date). If the Employee has satisfied the eligibility requirements in Section 2.1 as of the Employee's Reemployment Commencement Date and then satisfies the One Year Holdout Rule, the reemployed Employee will enter the Plan as of the first day of the Eligibility Computation Period in which the Employee completes one Year of Service. Furthermore, the recognition of any Years of Service completed prior to an Employee's Break(s) in Service will be subject to both the One Year Holdout Rule and the Rule of Parity.

(B) Rule of Parity. Any Years of Service completed prior to an Employee's Break(s) in Service will not be counted in determining an Employee's eligibility to participate in the Plan if those Year(s) of Service are disregarded pursuant to the Rule of Parity. If such former Employee's Year(s) of Service are disregarded under the Rule of Parity, then (A) the reemployed Employee will be treated as a new Employee for purposes of Section 2.1 and (B) the Employee's Eligibility Computation Period will commence on the Employee's Reemployment Commencement Date and subsequent Eligibility Computation Periods will be based upon the provisions of the definition of Eligibility Computation Period (with the Reemployment Commencement Date substituted for the Employment Commencement Date, if applicable). If the Employee has not satisfied the eligibility requirements in Section 2.1 as of the Employee's Reemployment Commencement Date and such former Employee's Year(s) of Service are not disregarded under the Rule of Parity, then the Eligibility Computation Periods will remain unchanged. If the Employee has satisfied the eligibility requirements in Section 2.1 as of the Employee's Reemployment Commencement Date and such former Employee's Year(s) of Service are not disregarded under the Rule of Parity, the reemployed Employee will enter the Plan as of the Employee's Reemployment Commencement Date.

[Jim Chad]

Austin and Tom

I have a similar situation. Thanks for all of the information. My brain seems to be a little foggy right now.

Are you saying the employee has met the eligibility requirements on the rehire date of 4-21-10?

[Tom Poje]

that would be my understanding, which of course could always be wrong.

did the person work 1000 hours 'within 12 months of date of hire'?

yes.

was he wroking on the next entry date? no

did he have a break in svc? yes

if you have the one year hold out rule, then he doesn't enter until he completes another year, but then it becomes a retroactive entry to date of rehire, which is next to impossible to handle in a 401k plan. at ASPPA Conferences the IRS personal strongly hinted you couldn't apply a 1 yr holdout to a 401k

[austin3515]

Are you saying the employee has met the eligibility requirements on the rehire date of 4-21-10?

At the risk of splitting hairs, he met the eligiblity requirements as of the end of the 12 consecutive months following his rehire. He ENTERS the Plan on 4/21/10.

[Tom Poje]

Austin -

are they gray hairs? (at this point in the game, its about all I understand)

[PFranckowiak]

Having he come back in on the rehire date meet what someone else said that isn't on the list -

"A year of service is an eligibility computation period in which 1000 hours are worked. The first eligibility computation period is always the 12 month period begininng on the date of initial hire. 12 months after hire the employee was credited with a year of service. He would have come in on 1/1/2010, but was on employeed, so the individual becomes an employee on date of rehire.

I am going to a 401(k) seminar next week, so I will see what the speaker says.

I appreciate all the input. I think he does come back in on rehire, but the client I guess wants him not to come in and my boss is trying to have me provide some "proof"

Thanks again.

Pat

[austin3515]

I WISH I had head a full head of gray hairs (preferrable to no hairs on my half way balded head...)

I know, my avatar can be misleading...

[pmacduff]

ok - I think I must have something coded incorrectly in my software on a rehire...here are the facts:

standard protoype 401k with 1 year/12 mos service, 1000 hours, age 21 & dual entry dates Jan & Jul 1

Employee over age 21 hired on 09/04/2007 terms on 10/10/2008. Had over 1000 hours from 09/07 - 09/08. would have entered 01/01/2009 if he stayed employed.

rehired on 06/08/2009

2007 = 711 hours

2008 = 1809 hours

2009 = 1160 hours

Under my old way of thinking he would enter the next entry date following rehire (07/01/2009) but am gathering from this thread you all would say he enters as of rehire on 06/08/2009.

Relius is not bringing him in at all in 2009?