Met eligibility, terminated before entry, rehired

[kwalified]

Plan Year: 5/1/11 -4/30/12

Eligibility: 21/ 1 YOS

Entry: quarterly

Employee DOH 9/6/10 DOB 8/6/80

Met eligibility: 9/5/11

Terminated: 10/21/11

Employee would have entered the plan 11/1/11, plan doc states that rehired employees who met eligibility but did not become a participant enters the plan on the later of 1) entry date on which they would have entered the plan or 2) the date of their reemployment, which was 4/30/11 (last day of plan year). My software is wanting to give this participant a SH non elective allocation based on compensation earned during the 2011 plan year, but I think that is erroneous. The plan excludes comp before the participant actually enters the plan. Thoughts would be appreciated.

[ETA Consulting LLC]

Plan Year: 5/1/11 -4/30/12

Eligibility: 21/ 1 YOS

Entry: quarterly

Employee DOH 9/6/10 DOB 8/6/80

Met eligibility: 9/5/11

Terminated: 10/21/11

I like the 9/5/11 (the day before the 1 year anniversary). Many people (incorrectly) believe that a year runs DOH through 1 year anniversary :-)

Employee would have entered the plan 11/1/11, plan doc states that rehired employees who met eligibility but did not become a participant enters the plan on the later of 1) entry date on which they would have entered the plan or 2) the date of their reemployment, which was 4/30/11 (last day of plan year).

Okay, the reemployment is 4/30/2012; not 2011.

My software is wanting to give this participant a SH non elective allocation based on compensation earned during the 2011 plan year, but I think that is erroneous. The plan excludes comp before the participant actually enters the plan. Thoughts would be appreciated.

So, he was hired on the last day of the plan year, and had no compensation between 11/1/2011 and 4/30/2012. You are correct. Are you sure the software has the Compensation fields entered correctly. If plan eligible compensation is zero, how can the software calculate a contribution?

Good Luck!

Good Luck!

[Tom Poje]

I think he does have comp during the plan year because it runs from 5/1/11 - 4/30/12

so he would have had comp from 5/1/11 - 10/21/11

(and we won't get into the argument of comp on 4/30/12 - I suppose if his last paycheck was dated 4/30/12 then he might have 1 day of comp)

If an allocation is based on comp from date of participation then I would agree I don't see him having any comp for allocation purposes, but unless you have some really good software and running the plan monthly or something it wouldn't surprise me if the software doesn't have a correct comp.

Of course, if the plan is top-heavy and there were allocations besides safe harbor then he is due a contribution based on full year comp anyway.

I suppose even stranger if he was the only NHCE then you would have someone who has entered the plan with no comp for 'allocation' purposes, so receives nothing, and you fail coverage. bizarre.

[kwalified]

Thanks. Yes he was rehired 4/30/12, not 4/30/11, and I went in and just manually zeroed out his compensation for plan purposes, despite the software giving the allocation.

Thanks for your comments.