rehired participants and re-entry.

[Lori H]

hello

a participant, who met eligibility then entered the plan then terminated enters the plan upon their date of rehire. Is there a 5 year break in service rule that says if you terminated employment longer than 5 years you have to meet eligibility again? I think I am confusing that with another reg.

thanks

[Lou S.]

I think you may be mixing the vesting and eligibility rules.

[QDROphile]

There are break-in-service rules for eligibility (rule of parity, if that rings a bell) that use 5 years as part of the standard for determining whether or not pre-break service will be counted after a break, but those rules are trumped if the participant accrued a vested benefit before termination. The vesting rules are different, but use a five-year break standard for counting pre-break serivce.

[Tom Poje]

Lori:
the following are the IRS publications
one for eligibility (participation) - page 5 has particular notes in regards to break in svc.
and the other for vesting

generally, once you have obtained some vesting you can't disregard any service because of the rule of parity, but then that is usually a 401k plan.

at the ASPPA Conference 2010 the IRS individual noted

If there is a vested amount, prior service cannot be disregarded, even if the vested account is attributable to deferrals. IRC 411(a)(6)© and (D). However, if there is a vested percentage, but no vested amount (i.e., no deferrals made in this example), the rule of parity does permit prior service to be disregarded.

min partic standards publication 6388.pdf

minimum vesting standards.pdf

[Lori H]

thanks for these helpful replies and the highlighted attachments Tom.

[Lori H]

Let me ask this....an employee becomes eligible is employed on the entry date and elects NOT to participate. That participant subsequently terminates and is rehired over 5 years later, do they enter the plan on their date of rehire?

[Tom Poje]

if someone elected not to defer, and there were no other contributions, then the note from the ASPPA Conference would seem to apply - prior service disregarded

If the person actually elected OUT of the plan, then I don't think it matters, as that is suppose to be a one-time irrevocable election, I would hold even if he quits and comes back later1.401(k)-1(a)(3)(v) makes no mention of quit/rehire, but simply says

for the duration of the employee's employment with the employer

(but it also adds " including plans not yet established" - so that would seem to me to be all encompassing)

[ESOP Guy]

Although do check the document. I can't remember the last time I saw a document that doesn't cover rehires in almost every situation.

I say this because so for this conversation is talked about the legal rules. I have seen plan documents that pretty much say "once a participant always a participant" and the person enters upon rehire basically always.

You can write a document to allow for more generous rehire entry provisions then the law requires and like I said I have seen it.