401(K) Participant Rehire

[Guest Ohiobcat]

I have a client with an individual who was actively participating in a safe harbor 401(k) plan. This person terminated and then was rehired several years later. From what I have researched it appears this former (and newly rehired) employee immediately gets back into the plan and can begin deferrals and receive the safe harbor match.

1. Is there agreement on that assessment?

2. The client is asking if there is an amount of time that must lapse before prior service is disregarded.

From what I am reading the break in service rules only apply to employer contributions. Is it true an 401(k) participant that is rehired is immediately eligible to participate regardless of how long ago they terminated? Is there anything I can provide the client with in writing that supports this?

Thanks

[Tom Poje]

this is from the 2010 ASPPA Conference Q and A

If there is a vested amount, prior service cannot be disregarded, even if the vested account is

attributable to deferrals. IRC 411(a)(6)© and (D). However, if there is a vested percentage,

but no vested amount (i.e., no deferrals made in this example), the rule of parity does permit

prior service to be disregarded.

sp basically, if the person ever had anything then no you can't disregard prior service.

the one year break in svc rule makes no sense in a 401k plan, because once a person completes a year of service the entry date is retroacrtive to date of hire. but you can't retroactively defer, so you are pretty well stuck. almost all (if not all) 401k documents I've seen call for immediate entry on rehire.