Employee rehired after 11 years

[katieinny]

The plan is a 401(k) plan. The employee was first hired in 1995, term'd in 1997 and was then rehired in 2008. He met the eligibility requirements when he term's in '97, but was 0% vested. I don't have a lot of first hand information other than e-mails passed along to me by the investment advisor (with permission). The employer says the TPA wants them to put $15,000 into the employee's account to restore his balance. They are not happy about that. I'm guessing that $15,000 was forfeited due to a deemed distribution following the termination. I have a copy of the adoption agreement, but not the basic plan document. The employee has met the one-year/1000 hours requirement since his rehire and has re-enterd the plan. Whether or not the plan uses the one-year hold out rule or the rule of parity, wouldn't the 5-year break-in-service rule wipe the slate clean?

[Tom Poje]

well, IRC 411(6)© does say (ERISA 203 (b)(3)© says the same thing)

years of service after such 5-year period shall NOT be required to be taken into account for purposes of determining the nonforfeitable percentage of his accrued benefit derived from employer contributions which accrued BEFORE such 5-year period.

in other words, under the 5 year rule if the person had some vesting, then you have to count years of service, but only for future accruals not those that were BEFORE the break.

(Unless I suppose you had a special document written that said everything would be restored)