When is an employee terminated?

[AKconsult]

How does a company decide that an employee is terminated and eligible for a distribution? Specifically in the case of a part-time employee who gets called in on and off over a long period of time? Should it relate to whether or not they are receiving other company benefits?

[ETA Consulting LLC]

It appears as if he is what may be called a 'casual employee'; an employee, nonetheless. I don't think it's a direct science other than what is reflected on the employment records of the company. One sure way to affirmatively end employment is to resign (or get fired). Employment doesn't begin and end like drinking (e.g. "I quit drinking yesterday, but I'm starting back tomorrow ).

Good Luck!

[david rigby]

One sure way to affirmatively end employment is to resign (or get fired). Employment doesn't begin and end like drinking (e.g. "I quit drinking yesterday, but I'm starting back tomorrow").

Maybe. The end of an employment relationship is in the hands of the ER and/or the EE. The ER could label this person as terminated, but also permit him/her to be "on-call" or a contract employee.

Do it affirmatively, and consistent with other similar situations. (For example, if the on-call work is steady, the ER might choose to forego any formal declaration of severance of employment.)

[Tom Poje]

hmmm. if the plan is a 401k is he being included in the ADP test? even if it is not a 401k plan, unless the plan operates under the 1 year break in service rule, you are pretty well stuck being a participant once you have ever met eligibility.

common document language would be something like:

an individual shall not be an Eligible Employee if such individual is not reported on the payroll

records of the Employer as a common law employee. In particular, it is expressly intended that individuals not treated as common law

employees by the Employer on its payroll records and out-sourced workers, are not Eligible Employees and are excluded from Plan

so, is he on the payroll or not?

[ESOP Guy]

This might not help in this type of position but one of the first questions I ask my clients when they ask if someone should be treated as terminated for the qualified plan is to ask if you have sent the person their COBRA info.

I have been amazed at the number of times they said "yes" to that, but were not sure if the person was terminated for the ESOP or 401(k) plan.

To me that is a pretty good marker the company is treating the person as terminated.

However, this type of position my not have had health insurance in the first place.

[AKconsult]

Yes he is on the payroll, he just comes and goes. The question really pertains to whether or not he should be given a distribution from the plan. The employer knows there is a good possibility he will be called back into work, so from that standpoint it seems he is not terminated and not eligible for a distribution. But on the other hand, he is no longer drawing a paycheck and there is no guarantee he'll be called back in, so maybe he should be allowed to take a distribution.

[GMK]

ESOP Guy - Just an aside that COBRA notices go out to those who lose their coverage due to a reduction in hours, so receiving a COBRA notice doesn't always indicate that someone is no longer an employee. I agree with you that the COBRA notice is a useful test point.

AKconsult - If each time the person on the come and go schedule leaves, she/he goes through the same treatment as a person who resigns, retires, etc., and goes through the hiring process each time she/he comes back, then she/he is not an employee during the period of absence.

As long as he's on the payroll, however, it's hard to say he's terminated.