Wanting immediate entry but not for the interns

[JPIngold]

The client really likes immediate entry for recruiting purposes, but doesn't like it for the interns and other part-timers (even though I tell them these are exactly the employees that help our (a)(4) testing). Has anyone used the exclusion that is part of the Relius documents that allow the plan to exclude those employees who are not regularly scheduled to work 1,000 hours in a year?

I can think of a couple of pitfalls on this, like:

1) What if they end up working 1,000 hours and you didn't allow them to defer.

2) If you do like them and they don't work 1,000 hours in that first year, but you hire them later ... would they need to wait until the year after they work 1,000 hours or do we say they are now "regularly scheduled" to work 1,000 hours and let them enter immediately??? That doesn't seem to be the way it reads. It sounds like we would need to wait until they work the 1,000 hours and then let them in the next entry date.

Just wondering if anyone has other pros and cons to using that language.

[Lou S.]

Yes it works fine.

You simply have them enter on a the next future entry date if they do satisfy the 1,000 hour rule - you just need to draft the entry conditions correctly.

The devil is in details of tracking those that do become eligible that the client assumed would never work 1,000 hours.

[JPIngold]

Thanks Lou.

Therefore, since the plan provides for immediate entry for all eligible employees, then we have 365 potential entry dates. However, since the document says that the "year of service" is credited at the end of the computation period, we don't have to worry about watching for the exact day they hit 1,000 hours. They would enter either on the day after their first anniversary date if they work 1,000 hours in that 12-month period or they would enter on January 1st of the first calendar year in which they work 1,000 hours if they don't do so in their first 12-month period. Sound right?

[ESOP Guy]

Do you have to let them enter the plan if they work over 1,000 hours? If they are regularly sch to not work a 1,000 hours and that is the class they are in why can't you keep excluding them? If you wrote an exclusion that said all interns aren't eligible no one would claim if they work 1,000 hours that have to be let into the plan. So why now?

Mind you they have to be on the coverage test after they work 1,000 hours but it isn't clear to me they have to allowed to defer or given employer contributions.

I am willing to be told I am wrong here but at this point I am not seeing it.

[Mike Preston]

Look at the 410(a) regs. There is an example there that takes a bite out of this idea.