Eligibility

[Guest andmik]

Hi Everyone:

Although I know this answer, I have a client denying this is how it is applied and wants some type of legal reference and I am unable to find a specific point.

Client requires One Year of Service (12 months and 1000 hours) for initial eligibility. I have told her that once someone meets eligibility they do not need to continue to meet eligibility (12 months and 1000 hours) every year. She is claiming that they remove people each year they do not complete 1000 hours. This is not only absurd from a tracking perspective but also wrong.

Does anyone know how I can provide some support that eligibility is not a revolving requirement each year?

andmik

[GMK]

This thread says that the plan document holds the key (see post 6):

http://benefitslink.com/boards/index.php?/topic/52611-continuing-401k-deferrals-while-using-vacation-prior-to-actual-dot

The plan document will say when a participant is no longer eligible, for example, when the participant moves from an eligible class to an ineligible class of employees. Presumably, your client will say that those who do not work 1000 hours are in an ineligible class, but the plan document probably doesn't say that. Once a participant, always a participant.

[Guest andmik]

^{Thank you. You are correct their document does not say that if they do not work 1000 hours in a subsequent year they are in an ineligible class. I agree - once elgible always eligible for the most part. I appreciate you taking the time.}

[K2retire]

Are they confusing eligibility requirements with allocation conditions?

[david rigby]

Are they confusing eligibility requirements with allocation conditions?

Clearly, yes. The original poster might help his/her client understand that pension law uses separate provisions for "eligibilty to participate" and "eligibility for an accrual".

[ESOP Guy]

Are they confusing eligibility requirements with allocation conditions?

For what it is worth when I am having this problem with the client I find the following helps.

Use the word eligible/eligiblity and so forth when talking to them about the eligiblity requirements

Use the word share/don't share when talking about the allocation conditions.

Part of the problem is we often times say a person is elibible for an allocation. The word eligible gets used but in many plans it also has a very specific meaning in the context of the eligibility requirement.

So for exampale I will tell a client it takes 12 months and 1,000 hours to be come eligible to be a participant in the plan. Then one has to work 1,000 hours to share in the employer contribution.

I have found not repeating the words "eligible for" (or even "particpate in") the employer contribution, but use instead the words "share in" helps often times.

[Guest andmik]

_{Thank you for your replies.}

_{I actually use the term eligibilty for purposes of the initial eligibility, and I like to use qualify for purposes of annual allocations.}

_{However, the client is fine now that I explained that the intent of eligibility is to meet it once, not year to year. She was just thinking the requirements must be met every year in order to stay in the plan.}

[rcline46]

Late to the discussion, but if one has to qualify each year, how can someone defer in January if they have noy yet qualified for the year?