Entry date for a rehired participant?

[Lori H]

A former participant is rehired and does not elect to join the plan on their date of rehire. Do they wait until the next entry date to enter the plan and actively participate?

[Lou S.]

What does the document say?

If they are eligible when they return under the document the procedures on changing elections would govern as they are a non-contributing participant who elected a 0% deferral rate.

I'm assuming this is a 401(k) plan, though perhaps that's a faulty assumption on my part.

[Lori H]

Section 3.5 of the document does not address a rehire not electing to participant. We were leaning towards the next entry date. Thanks for your response.

[BG5150]

Eligibility for the plan should have nothing to do with the deferral election (or lack thereof) of the employee.

In many 401(k) plans, if you were once eligible, you become immediately eligible again upon rehire.

The document WILL address that.

[Lori H]

The question was not about eligibility. It was about entry.

[Bird]

It's probably in a different section of the document, or else you are over-thinking it. Odds are that they re-enter on their date of re-employment. An election to "contribute" (I assume that's what you meant when you said "...does not elect to join the plan...") has nothing to do with entry dates - if the plan says they re-enter when re-employed, then they are a participant on that date. Contributing should not be confused with participating.

[ESOP Guy]

I agree you seem to be confusing entry with something else. You simply enter a plan. You never have to do anything to enter the plan. You merely have to meet the requirements under the plan document. Once that happens you enter the plan on the entry date it says to do so.

[SearchLight]

Lori, are you asking when the participant would next get an opportunity to start deferring if he took a pass on the opportunity offered on his (re-)entry date? The entry date will remain the same, but there might still be a deferral commencement date to consider.

The document I use (Corbel) handles this as an administrative procedure rather than a document provision, but it does provide a space for the plan to define when the next deferral commencement date is if the participant doesn't start deferring on his entry date but later decides he wants to defer. Other documents might handle this differently, though.

There's no requirement that this commencement date be the same as the plan's entry dates, although they're often the same for administrative ease. The only limitation the Corbel procedures place on this date is that it can't be less frequent than once a calendar year.

[My 2 cents]

Some of the articles I looked at seem to say that this can be problematical for 401(k) plans in particular, because (a) re-entry is generally required to be immediate (or retroactive to date of rehire if any kind of waiting period is required) and (b) there is a duty in a 401(k) plan to offer the participant the opportunity to elect to make contributions upon becoming a participant. So if a former participant is rehired, the burden to get an election form immediately into their hands must be dealt with to avoid an operational failure. Nobody ever said it was easy to administer retirement plans!

Would default contribution levels be good enough to avoid operational problems when a former participant is rehired? If this is a nonsensical question, please bear with me - I do not work on 401(k) plans.