How do break in service rules apply to service pre-ERISA?

[chris]

Client terminated employment with hospital early in 1974 after 17 years of service. Client rehired mid- 1976 and then terminated mid 1979. HR department says client is not entitled to anything because client was: 1) not 55 years old and 2) did not have 10 years of service at date of termination in 1979.

I've requested copies of SPD's and plan doc's for the requisite years. DB plan was amended effective Jan 1, 1976 (I assume to comply with ERISA/IRC requirements). The plan doc as of Jan 1, 1976 says that credited service prior to Jan 1, 1976 shall be computed under the terms of the plan in effect prior to jan 1, 1976. That plan doc is silent on breaks in service other than to say that an authorized leave of absence is not to be considered termination of employment under the plan.

SPD for plan doc effective Jan 1, 1976 says that employees who terminate with 10 years of service or more will be entitled to 100% of their accrued benefit. That short paragraph comes right after the paragraph which says that if you terminate employment before you are eligible under the plan and before you are vested, you get nothing. Of course, SPD's final paragraph states that it is not a contract and provisions in the plan trump anything in the SPD.

If prior service could be counted, then client definitely has 10 years of service. Client however was 44 years old at date of termination in 1979. So, it may be that client's not entitled to anything. It just doesn't sound right that an employee can work for almost twenty years for one employer and then not be entitled to anything in the DB plan because the e/ee wasn't 55 at the date employee terminated employment. I work mostly with DC plans so maybe that's why it doesn't seem to fit.

Anybody have any observations??? Any comments appreciated.

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[chris]

This is an added note to my post above.

I've been looking at the issue and have run across Reg. §1.411(a)-5(B)(5). That Reg. seems to say that pre-1971 service will count, notwithstanding §411(a)(4)(F) (the disregard of pre-ERISA service under plan's pre-ERISA break in service provisions), if a participant has at least three years of service at any time after Dec 31, 1970.

In my situation above, client's pre-1971 service (approx. 13 years) would appear to count for purposes of vesting such that at termination of employment client had 10 years of service which entitled her to 100% vesting.

Anyone else familiar with the operation of this Reg???

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[Guest Brian4]

Did the service definition for pre-1976 years refer to "continuous" or "uninterrupted" years?

If there is no parity break in service provision saying prior years are not counted, and the defintion just says add the years up, couldn't you say the prior years count? Is there a section in the plan that talks about rehires?

What was the plan's vesting requirement prior to ERISA?

[chris]

Brian4:

In pre-76 plan, service is defined as continuous employment. Nothing as to rehires.

76 plan does not exclude any prior periods of service as described in 411(a)(5).

Pre-76 plan speaks of "vesting requirements as set forth herein" but never lays them out. There's only a short one sentence paragraph that says that if you terminate employment and you're 55 and have 10 years of service then you're entitled to retirement benefits under the plan; otherwise, you have 0.

The issue is whether the 76 plan doc can exclude prior service without actually saying that.

See the thread in the Retirement Plans in General message board.

Chris

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[This message has been edited by chris (edited 03-16-2000).]