Employee rehired after plan started

[401king]

Individual was employed from 1997-2003. Plan became effective 1/1/2009. Employee is now being re-hired.

Does the fact that the employee was never a participant remove the credit for the prior service? Or, should the employee be eligible immediately upon rehire because they completed the eligibility requirements (albeit, over 10 years ago).

[Belgarath]

I believe they must enter immediately. In order to totally disregard this service for eligibility purposes under the "rule of parity" the employee must have been a PARTICIPANT at the time the break periods begin. I grant you that this seems ridiculous, but that seems to be the literal interpretation of IRC 410(a)(5)(D) and ERISA 202(b)(4). Never quite understood the sense of this, but my early mentor in this business told me to never try to make sense out of it all...

[Guest KristenE]

What does the plan document say? Generally you should start with the plan document when trying to answer questions.

[BG5150]

Yeah. Does the plan doc exclude service prior to the plan inception for eligibility?

[401king]

The only place in our documents that we can exclude prior service is vesting. Sounds like everyone agrees that any service by an employee should count towards eligibility, but only if the service satisfied eligibility.

It was hard for me to believe the service would be counted because, taking it further, it would be tough for an employer hiring someone that worked with the company 20 years ago to track if that employee is eligible for a new plan (and vesting to go along with it).

[ETA Consulting LLC]

It is for this reason that many ERISA attorneys tell their clients to "never rehire". There are rules that apply to that often require you to give credit for that prior service.

[12AX7]

Individual was employed from 1997-2003. Plan became effective 1/1/2009. Employee is now being re-hired.

Does the fact that the employee was never a participant remove the credit for the prior service? Or, should the employee be eligible immediately upon rehire because they completed the eligibility requirements (albeit, over 10 years ago).

I agree with the analysis others have given you. One other aspect of all this to consider is if the employee would have otherwise satisfied the eliibility requirments had the plan been in place at the time employee terminated service. For example, if the eligibility requirements were 21/1, and the employee never completed a year of service for eligibility purposes, this person would not be a participant upon rehire.