eligibility question

[cpc0506]

Plan document's eligibility is 6 months of service. Entry is 1/1 and 7/1

Employee A has has following employrment history:

1. hired 1/7/2008

2. terminates 3/31/2008

3. rehired 6/9/2008

4. terminates again 9/28/2008

5. rehired 1/25/2012

6. terminated 6/22/2012

Has this person met the eligibilty requirements for the plan? I don't believe so, but the software system is giving him an entry date of 1/1/12.

Any thoughts...

[BG5150]

I would say yes.

Service spanning rules would have the person satisfying the 6 mos of service on 7/6/08. Assuming they met any age requirement, I believe they would enter the plan on 1/25/2012.

[Tom Poje]

　

this is eligibility language from one document. I don't believe this is special language that pertains to the particular document, but rather a nice explanation/description of how things work. chances are you can find one of the situations the individual falls under.

(e)

Reemployment of an Employee Before a Break In Service and After Eligibility Requirements Are Satisfied. For any Plan Year in which the eligibility requirements under Section 2.1 are based on Years of Service, if an Employee Terminates Employment prior to the Employee's Entry Date in Section 2.1, the Employee had satisfied the eligibility requirements in Section 2.1 as of the Employee's Termination of Employment, and the Employee is subsequently reemployed by the Employer before incurring a Break in Service, then (1) the Employee will become a Participant as of the later of (A) the date that the Employee would enter the Plan had he or she not Terminated Employment with the Employer, or (B) the Employee's Reemployment Commencement Date, (2) the Employee's pre-termination Year(s) of Service (and Hours of Service during any computation period) will be counted for all purposes, and (3) the Vesting Computation Period and/or benefit accrual computation period, as applicable, will remain unchanged.

(f)

Reemployment of a Participant Before a Break In Service. For any Plan Year in which the eligibility requirements under Section 2.1 are based on Years of Service, if an Employee Terminates Employment after becoming a Participant and is subsequently reemployed by the Employer before incurring a Break in Service, then (1) the reemployed Employee will reenter the Plan as of the Employee's Reemployment Commencement Date, (2) the Employee's pre-termination Year(s) of Service (and Hours of Service during any computation period) will be counted for all purposes, as applicable, and (3) the Vesting Computation Period and/or benefit accrual computation period, as applicable, will remain unchanged.

(g)

Reemployment of an Employee After a Break In Service and Before the Entry Date. For any Plan Year in which the eligibility requirements in Section 2.1 are based on Years of Service, if an Employee Terminates Employment with the Employer either prior to or after satisfying the eligibility requirements in Section 2.1 (but before the Employee's Entry Date in Section 2.1) and the Employee is subsequently reemployed by the Employer after incurring a Break in Service, then the Employee's Years of Service that were completed prior to the Break in Service will be recognized.

　

(h)

Reemployment of a Participant After a Break In Service. For any Plan Year in which the eligibility requirements under Section 2.1 are based on Years of Service, if an Employee (1) was a Participant in the Plan, (2) Terminates Employment with the Employer, and (3) is subsequently reemployed by the Employer after incurring a Break in Service, then the Employee's Year(s) of Service that were completed prior to the Break in Service will be recognized.

(i)

Ignoring Service for Eligibility If Service Requirement for Eligibility Is More Than 1 Year of Service.

Notwithstanding anything in the Plan to the contrary, if this Plan (or a component of the Plan) provides at any time that an Employee must complete more than one (1) Year of Service for eligibility purposes, and

such Employee will have a 100% Vested Interest in the Participant's Account (or the sub-Account that relates to such component) upon becoming a Participant in the Plan, then with respect to an Employee who incurs a Break in Service before satisfying such eligibility requirement (1) the Employee's Year(s) of Service (and Hours of Service) that were completed prior to the Employee's Break(s) in Service will not be counted for eligibility purposes, and (2) the Employee's Eligibility Computation Period will commence on the

Employee's Reemployment Commencement Date and subsequent Eligibility Computation Periods will be

based upon the provisions of the definition of Eligibility Computation Period (with the Reemployment

Commencement Date substituted for the Employment Commencement Date, if applicable).

[pmacduff]

We just went through an IRS audit with a client who had 6 "consecutive" mos eligibility and employees that come and go due to the nature of the business. The agent checked the employee/participant data very carefully with regard to the service spanning rules. Thankfully there were very few people "missed" but they did make the client go back a few years, double check and correct all under SCP. That being said - I agree with BG5150 on the 01/25/2012 entry date because I had to check a LOT of people for this audit....

[cpc0506]

The adoption agreement is 6 months of service, not 6 consecutive months of service. So his entry date should be his rehire date of 1/25/12.

[imchipbrown]

My documents have several choices of when you become a Participant:

the entry date:

• coincident with or next following
• next following
• coincident or immediately preceding
• immediately preceding
• nearest to

the date the requirements (age and/or service) are met.

You stated that the entry dates are 1/1 and 7/1. 1/25 is not an entry date in and of itself.

[BG5150]

^^ You must read the part about rehires

[imchipbrown]

I see.

[12AX7]

We just went through an IRS audit with a client who had 6 "consecutive" mos eligibility and employees that come and go due to the nature of the business. The agent checked the employee/participant data very carefully with regard to the service spanning rules. Thankfully there were very few people "missed" but they did make the client go back a few years, double check and correct all under SCP. That being said - I agree with BG5150 on the 01/25/2012 entry date because I had to check a LOT of people for this audit....

Isn't the 6 consecutive months option usually tied in to a specified number of hours worked during that ECP?

edit for clarification: In other words, is there a difference between 6 months and 6 consecutive months if perhaps 1 hour of service is required when using the 6 consecutuve months option.

[cpc0506]

There is a difference between 6 consecutive months of service and 6 months of service. The Adoption Agreement states 6 months of service.

[12AX7]

Kathy, I understand your situation completely and the difference between the two eligibility determinations. I was questioning if pmacuff had an hours of service condition for the 6 consecutive months of service requriement. That's typically what that provision is reserved for.

[pmacduff]

The IRS agent said that basically there is no difference in the case we were working on...& that you can't really have 6 "consecutive" months of service as your definition because under elapsed time (and in conjunction with the service spanning rules) it won't work. You'll end up counting the time they were gone anyway. Most entered on odd rehire dates as in Kathy's example. In this particular plan doc the "consecutive" was actually not a checkbox option but was typed in under "other". No hours requirement, though.

[12AX7]

I agree with the IRS' assessment of the situation. This is an example of what I was referring to and therefore questioned the hours requirement. I've seen some plans with 1 hour elected in this provision, but then I think it would not be an elapsed-time method of crediting service during the ECP.

<000o><\000o> consecutive months (not more than 12) during which the Employee completes at least <00dU><\00dU> Hours of Service (cannot exceed 1,000). If an Employee does not satisfy this requirement in the first designated period of months following his/her Employment Commencement Date, such Employee will be deemed to satisfy this condition upon completing a Year of Service