Rule of parity for re-hired participant

[khr]

I have a participant who had 4 years of service before he terminated.

He then had 4 1-year breaks in service before he was rehired. He had 1000 hours in the plan year he was rehired in.

The plan is immediate entry for 401k & a 1-year of service requirement for profit sharing.

Does the participant come in for profit sharing during the year he was rehired since the number of consecutive 1-Year Breaks in Service does not exceed the greater of five or the aggregate number (4) of pre-break Years of Service?

[Belgarath]

Ignoring prior service for eligibility purposes under the "rule or parity" would only apply if the rehired employee terminated at zero per cent vesting. Once there is any vesting, all prior service would count upon rehire, and participation would be immediate. Since this person presumably had some level of vesting (?) then entry is immediate.

P.S. - I suppose the plan could be using the "one year hold out" rule which would require retroactive re-entry if requirements are satisfied, but I personally never see this in 401(k) plans. (others may have a different opinion) However, you should check your plan document to confirm.

[My 2 cents]

Ignoring prior service for eligibility purposes under the "rule or parity" would only apply if the rehired employee terminated at zero per cent vesting. Once there is any vesting, all prior service would count upon rehire, and participation would be immediate. Since this person presumably had some level of vesting (?) then entry is immediate.

P.S. - I suppose the plan could be using the "one year hold out" rule which would require retroactive re-entry if requirements are satisfied, but I personally never see this in 401(k) plans. (others may have a different opinion) However, you should check your plan document to confirm.

How do you bring someone back into a 401(k) plan on a retroactive basis? What mechanism would be used to provide the opportunity for salary reduction amounts for the period for which retroactive membership is granted (especially if the person wants to defer maximal amounts and is too young for catch-up payments)?

[K2retire]

Ignoring prior service for eligibility purposes under the "rule or parity" would only apply if the rehired employee terminated at zero per cent vesting. Once there is any vesting, all prior service would count upon rehire, and participation would be immediate. Since this person presumably had some level of vesting (?) then entry is immediate.

P.S. - I suppose the plan could be using the "one year hold out" rule which would require retroactive re-entry if requirements are satisfied, but I personally never see this in 401(k) plans. (others may have a different opinion) However, you should check your plan document to confirm.

How do you bring someone back into a 401(k) plan on a retroactive basis? What mechanism would be used to provide the opportunity for salary reduction amounts for the period for which retroactive membership is granted (especially if the person wants to defer maximal amounts and is too young for catch-up payments)?

Precisely why you don't see it this provision in 401(k) plans! But it is possible to use that rule only for employer contributions.

[Belgarath]

Agreed. I don't see it in 401(k) plans even for the employer contributions, but I wanted to throw in that possibility...