Eligibility using elapsed time method

[Belgarath]

I've only seen a couple of plans that ever have used this. Have a sort of unusual situation here.

Employer currently has just a 6-month eligibility requirement, with no hours requirement. Employer has some people who come and go for short periods. Under the service-spanning rules in 1.410(a)-7, this is causing people who work only a few hours per year to become eligible - they will work for 1 week, terminate for 2 months, work another week, terminate for 4 months, etc..

First, this is a poor design for this type of employer. That aside, they want to keep 6-months. Simply making it "6 consecutive months" is meaningless under these same service-spanning rules.

What if they just say something like "6 consecutive months with a minimum of 500 hours" (or 800 or 1000 hours - whatever), or something along those lines? I believe this is perfectly acceptable. Are there any "hooks" or traps for the unwary that I'm missing?

[BG5150]

Nothing wrong with that, as long as there is a provision that if someone works 1,000 hours in a year's time, they would enter the plan.

For example, someone starts in January and works 400 hours by the end of March. He leaves. No 500 hrs in 6 mos. He comes back at the end of April and works another 400 hours by the end of July. He leaves again. No 500 hrs in "6 consecutive months." Then he comes back in October and works another 400 hours by year's end. He's got his 1,000 hours in a year.

[Belgarath]

Thanks BG - I think what you are talking about touches upon my possible discomfort or lack of understanding.

Using your example, under the service spanning rules, why wouldn't he have "6 consecutive months" actually in June, with more than 500 hours and therefore be eligible - assuming they are using 500 hours?

[GMK]

I found this useful (on pages 6 and 7 of the pdf):

http://www.irs.gov/pub/irs-pdf/p6388.pdf

[david rigby]

Some employers might not use hours because there is logisitical difficulty in tracking hours, especially if multiple locations are involved. While adding hours to the plan definition may solve your problem, just make sure you have the administrative tools to handle it.