Eligibility - Entry Date

[retbenser]

Plan Year = Calendar Year

Eligibility: Employee shall be eligible to make deferrals on the first day of the first month or seventh month of the Plan Year coincident with or next following the date … he completes one Year of Eligibility Service;

One Year of Eligibility Service is 12 months period beginning with employment date during which he completes 1000 hours of service.

Employees hired on 11/1/2009. Complete 1000 hours on July 1, 2010.

Question: When can employee start participating?

Analysis: He will complete a Year of Service on 11/30/2010. The Plan Year that is "coincident with" the date he complete one year of Service is 2010.

Conclusion: He can enter the plan on 1/1/2010 because that is the start of the Plan Year (2010) that coincides with his completion of a year of service.

Comments?

Thanks.

[Andy the Actuary]

The coincident with or next following applies to the date. Since both entry dates in 2010 preceded the 12-month eligibility period end, the next date is 1/1/2011. If the language were to mean 1/1/2010, the Plan would typically have stated first day of the Plan Year in which eligibility criterion are met. One final point, before completely tossing out your conclusion: While eligibility to make deferrals as of a preceding date doesn't have a lot of meaning, nonetheless, look to how the Plan has been administered.

[retbenser]

The coincident with or next following applies to the date. Since both entry dates in 2010 preceded the 12-month eligibility period end, the next date is 1/1/2011. If the language were to mean 1/1/2010, the Plan would typically have stated first day of the Plan Year in which eligibility criterion are met. One final point, before completely tossing out your conclusion: While eligibility to make deferrals as of a preceding date doesn't have a lot of meaning, nonetheless, look to how the Plan has been administered.

Thanks. There is nothing in the document that precludes entry dates preceding the end of the 12-month period.

I am still not clear what is wrong with my analysis.

I am going to re-state my argument in 4 statements.

(1) Date he completes one year of service is 11/30/2010.

(2) Plan year that coincides with 11/30/2010 is 2010.

(3) Employee is eligible to participate on the first or seventh month of that plan year (2010)

(4) Therefore, employee can participate on 1/1/2010.

Which of the above 4 statements is wrong?

Thanks again.

[Andy the Actuary]

It's the interpretation of the antecedent of "coinciding with." Break your sentence up.

(a) first day of the Plan Year is 1/1/2010. Does this date coincide with or next follow 11/30/2010. NO

(b) seventh days of the Plan Year is 7/1/2010. Does this date coincide with or next follow 11/30/2010. NO

We are talking about the date coinciding or next following, not the Plan Year coinciding with. This is standard language to handle the case when, for example, an employee is hired on 7/1/2010. Then, one year from the hire date is 7/1/2011 which coincides with the first day of the seventh month. So, the employee would participate on 7/1/2011 rather than 1/1/2012.

Hope this helps.

[retbenser]

It's the interpretation of the antecedent of "coinciding with." Break your sentence up.

(a) first day of the Plan Year is 1/1/2010. Does this date coincide with or next follow 11/30/2010. NO

(b) seventh days of the Plan Year is 7/1/2010. Does this date coincide with or next follow 11/30/2010. NO

We are talking about the date coinciding or next following, not the Plan Year coinciding with. This is standard language to handle the case when, for example, an employee is hired on 7/1/2010. Then, one year from the hire date is 7/1/2011 which coincides with the first day of the seventh month. So, the employee would participate on 7/1/2011 rather than 1/1/2012.

Hope this helps.

Got it. Thanks.

[Bill Presson]

One other thing to look at is whether the document deems that the completion of the year of service for eligibility is completed at the end of 12 months or at the end of completing 1000 hours.

That would make a difference in the entry given the information you provided.

[My 2 cents]

Andy the Actuary has it right. The phrase "coincident with or next following" applies to the entry date vis a vis the completion of the eligibility requirements. In general, the word "completion" is not satisfied until the 12-month period is over.

By the way, where did 11/30 come from? The date of hire was 11/1.