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Application of minimum service rule


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An employer maintains two 403(b) plans, one with a year-of-service requirement (the "main plan") and one without (the "alternate plan"). After initially meeting the year-of-service requirement and becoming a participant in the main plan, if an employee falls below 1000 hours in any plan year, the employee is taken out of the main plan and placed onto the alternate plan. Does this violate the minimum service requirement since the employee can lose eligibility for participation in the main plan even if he/she does not have a break in service, or can the plans be aggregated for purposes of evaluating the minimum service requirement so that as long as the employee can participate in one of the plans it's OK? Based on my reading of section 410, it does not appear that the plan aggregation rules apply for purposes of section 410(a)(1). The main plan includes a mandatory employee contribution and the alternate plan instead provides for an elective deferral.

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