Service as an unpaid intern

[Guest Aust916]

If an individual who was previously an unpaid, intern of a company is later hired by the company as a regular employee, should his prior hours of work as an unpaid intern count towards the service eligiblity requirement under the company's 401(k) plan? Please assume that the company correctly treated this individual as an unpaid intern. Thanks for any help.

[ETA Consulting LLC]

This would be up to the terms of the plan. For instance, if one year of service is required, then a failure to work the 1000 hours during the first 12 month computation period will result in the employee having to meet that requirement during a subsequent computation period. If the unpaid intern actually worked the 1000 hours, then they would have met the eligibility requirements and should enter the plan upon rehire. Again, this should be verified within the terms of the plan, but there is nothing to state that service for eligibility purposes is excludable merely because it was performed as an intern. Vesting, on the other hand, may have service prior to the age of 18 excluded. It may be best to refer to the plan's language.

Good Luck!

[Guest Aust916]

But the plan says an hour of service is an hour for which an employee gets paid or is entitled to payment. This intern was not treated as an employee and did not get paid for her previous work as an intern.

[PensionPro]

An intern could be an employee or not. There are limited exceptions where an employment relationship does not exist. The DOL uses a 6 point test to make a determination. This DOL fact sheet should be helpful: http://www.dol.gov/whd/regs/compliance/whdfs71.pdf

[Kevin C]

The plan language you reference is straight out of the DOL regs (2530.200b-2). If they are not paid or entitled to payment, it isn't an hour of service. If at some point they are awarded or the employer agrees to back pay for those hours, then the regs say to count them as hours of service.