controlled group and eligibility rules to participate

[Guest Benefitsrock]

An employee works at a company a short period of time before she quits. She doesn't work long enough to meet the eligibility rules for a participant. 4 months later, she goes to work for the holding company (all in 1 controlled group) for a few years.

Does her time with the holding company count towards her eligibility to participate in the first company? I say no but someone else in my office says yes. Any one have any suggestions?

[ETA Consulting LLC]

An employee works at a company a short period of time before she quits. She doesn't work long enough to meet the eligibility rules for a participant. 4 months later, she goes to work for the holding company (all in 1 controlled group) for a few years.

Does her time with the holding company count towards her eligibility to participate in the first company? I say no but someone else in my office says yes. Any one have any suggestions?

It does count; as it is service for the same employer. That's what being a member of a controlled group does; they are treated as one employer.

Good Luck!

[Guest Benefitsrock]

An employee works at a company a short period of time before she quits. She doesn't work long enough to meet the eligibility rules for a participant. 4 months later, she goes to work for the holding company (all in 1 controlled group) for a few years.

Does her time with the holding company count towards her eligibility to participate in the first company? I say no but someone else in my office says yes. Any one have any suggestions?

It does count; as it is service for the same employer. That's what being a member of a controlled group does; they are treated as one employer.

Good Luck!

Thanks. So the employee then will participate in both plans? She will become a participant in the 1st plan based on sevice with the other company? I know she gets credit for vesting in the 1st plan but she didn't have any benefit when she quit. It seems weird to me that she will be allowed to participate in both plans.

[ETA Consulting LLC]

So the employee then will participate in both plans?

No. Each Plan may be written to cover only the employees of that particular company. The issue is "Service for Initial Eligibility". This includes all service of the Employer (which includes related members of a controlled group).

She will become a participant in the 1st plan based on sevice with the other company? I know she gets credit for vesting in the 1st plan but she didn't have any benefit when she quit. It seems weird to me that she will be allowed to participate in both plans.

She's not employed at both companies at the same time. So, she won't "likely" participate in both plans. When you look at eligibility for plan entry, you look at "all service of the employer". When you look at actually receiving contributions under a particular plan, you look at "compensation received while working for that particular member". Each issue is segmented for it's own analysis.

Collectively, the plans must pass the appropriate non-discrimination tests, but you're operating each plan under it's own terms. The term for "eligibility" is that you count "all" service performed for the employer (including controlled group members).

Good Luck!