eligibility - 2 year wait

[Chippy]

We have a difference of opinion on how the plan should operate. Plan requires 2 years of service and then enter on 1/1 Coincided with or immediately preceding.

The question is, how are the 2 years counted. Is it 2 years from date of hire, or is the first year, from date of hire to 1 year anniversary and then switch to plan year. Below is wording from the document. I think the SPD is confusing.

"Eligibility Computation Period" means a 12-consecutive month period beginning with an Employee's Employment Commencement Date; provided however, his succeeding Eligibility Computation Period for such purpose will switch to the Plan Year, beginning with the Plan Year that includes the first anniversary of his Employment Commencement Date. An Employee who is credited with a Year of Eligibility Service in both the initial Eligibility Computation Period and the first Plan Year which commences prior to the first anniversary of the Employee's initial Eligibility Computation Period will be credited with two Years of Eligibility Service.

"Year of Eligibility Service" means the following:

With respect to eligibility to receive Profit Sharing Contributions, Year of Eligibility Service means an Eligibility Computation Period during which an Employee completes at least 1,000 Hours of Service.

If the Plan provides for fractional Years of Eligibility Service, an Employee shall be deemed to earn 1/2 Year of Eligibility Service on the date that is six months after the end of the Eligibility Computation Period during which he earns his first Year of Eligibility Service; provided that the individual is an Eligible Employee on the applicable entry date.

Section 3.01 PROFIT SHARING CONTRIBUTIONS

Each Eligible Employee as of the Effective Date who was eligible to participate in the Plan with respect to Profit Sharing Contributions on or before the Effective Date shall be a Participant eligible to receive Profit Sharing Contributions pursuant to Article 4 on the Effective Date. Each other Eligible Employee who was not a Participant in the Plan with respect to Profit Sharing Contributions on the Effective Date, shall become a Participant eligible to receive Profit Sharing Contributions on the first day of the Plan Year coincident with or immediately preceding the date he attains age 21 and he completes two (2) Years of Eligibility Service; provided that he is an Eligible Employee on such date.

The SPD says:

ELIGIBILITY FOR PARTICIPATION

Eligible Employee

You are an "Eligible Employee" if you are employed by Company or any affiliate who has adopted the Plan.

Profit Sharing Contributions

You will become a Participant with respect to Profit Sharing Contributions on the first day of the Plan Year coincident with or immediately preceding the date you attain age 21 and you complete two (2) Years of Eligibility Service, provided that you are an Eligible Employee on that date.

Computing Service

With respect to eligibility to receive Profit Sharing Contributions, "Year of Eligibility Service" means an Eligibility Computation Period during which you complete at least 1,000 hours of service.

"Eligibility Computation Period" means a 12-consecutive month period beginning with your first day of employment. Any succeeding Eligibility Computation Period will then switch to the Plan Year, beginning with the Plan Year that includes your first anniversary of employment. You will generally earn an hour of service for each hour you are paid for the performance of duties for the Company (however, numerous exceptions and special rules apply).

[Belgarath]

This one. "or is the first year, from date of hire to 1 year anniversary and then switch to plan year"

[Bird]

Agreed.

Probably not what was intended; you don't see many 2 year eligibility plans but the intent is probably to have 2 "eligibility years" based on anniversary of hire date. The language about switching to the plan year was probably meant to happen after the second eligibility year. The existing language is generally used with a 1 year eligibility period.

As I see it, if this is a calendar year plan, a full-time employee hired on Dec 14, 2015 enters Jan 1, 2016 - one year of service on Dec 15, 2016 (for the "employment" year), and another Dec 31, 2016 (for the plan year, after the switch). Retroactive to Jan 1 means entry on Jan 1, 2016...half a month after hire.

[Chippy]

thank you. Yes, the intent is for two years from hire date. When the document was mapped over from the prior document, there is an elapsed time option and an hours of service option. Evidently the hours of service option was picked. The elasped time option should have been the correct choice and it wasn't pickup up on until now.