Rehired Employee and Entry Date

[Mr Bagwell]

Got a heated debate on this one.

19, YOS (1000) Semi Entry, 6/30 PYE

Employee hired 8/11/14

Terms 4/22/15

Worked 1000 hours between 8/11/14 and 4/22/15

Rehired 8/15/16

What is employees participation (entry) Date?

I say 1/1/17 because employee was not an employee on 1/1/16 or 7/1/16.

I am being told the employee is eligible 8/15/16 because employee satisfied eligibility requirements and crossed over 1/1/16's entry date and was therefore potentially eligible then.

Going to need solid backup for either answer. Boss is involved.

Thanks!

[Belgarath]

With the caveat that I haven't seen the document:

I agree with your Boss as to the 8/15 entry date. I'm assuming there has been no 1 year break in service (i.e. employee worked 500 hours in 2015 prior to termination).

For solid backup, I'd look at the terms of your document. This is typically very clear.

P.S. FWIW, here's the applicable provision from a normal Relius (now FIS) document:

If any Eligible Employee had satisfied the Plan's eligibility requirements
but, due to a severance of employment, did not become a Participant, then such Eligible Employee shall become a Participant as of the
later of (1) the entry date on which he or she would have entered the Plan had there been no severance of employment, or (2) the date
of his or her re-employment. Notwithstanding the preceding, if the rehired Eligible Employee's prior service is disregarded pursuant to
Section 3.5(d) below, then the rehired Eligible Employee shall be treated as a new hire.

[Mr Bagwell]

Thanks Belgarath!

I got hung up on employee not being employed on first entry date......

I don't think I have been messing this up as it doesn't come up that often. Most of the time the rehires were already a participant in the plan.

[CMarkB]

If the plan in question is hour counting and not using elapsed time and if there was not a break in service in 2015, I agree with the immediate entry upon rehire. See Treas. Reg. Section 1.410(a)-5(b)(1). And ultimately, as noted by Belgarath, you need to look at the plan document. Hope the cite is helpful.

[Mr Bagwell]

The break in service phrase has come up twice now. The employee did not work any hours from 7/1/15-6/30/16. So a break in service happened there.

[rcline46]

So, in the Plan Year 14-15, ee works 1000 hours, but terminates prior to entry date of 7/1/15. Definite BIS because no hours 7/1/15 thru 6/30/16. I think ee loses all service and is treated as new hire and must re-qualify.

Now the good part - if the plan uses 1,000 hours in a 12 month period as definition for 1 YOS, then his 1year is up on 8/14/17. Dual entry would be 7/1/17 or 1/1/18 and 1/1/18 works UNLESS the plan has retroactive entry.

FWIW, IMNSHO assuming I got all the parameters right.

[Mr Bagwell]

rcline... couple of parameters wacky.

8/11/14 - 6/30/15 (actually terminated 4/22/15) yes to 1000 hours

7/1/2015 - 6/30/16 no hours worked

7/1/16 - 6/30/17 for this discussion we will assume 1000 hours worked. Rehired 8/15/16

The first eligible compensation period is 8/11/14 to 8/10/15. worked 1000 hours, termed 4/22/15. The first entry date would have been 1/1/2016.

Yes, there was a break in service from 15-16 plan year, but I'm not sure where or why a potential problem.

As Belgarath mentioned above our document is very similar...

Rehired Eligible Employee Who Had Satisfied Eligibility. An Eligible Employee who satisfies the Plan's eligibility conditions, but who incurs a Separation from Service prior to becoming a Participant, subject to any Break in Service rule, if applicable, under section......, will become a Participant on the later of : (1) the Entry Date on whichhe/she would have entered the Plan had he/she not incurred a Separation from Service; or (2) his/her Re-employement Commencement Date.

There is no one year hold out rule.

Anything change for you?

Thanks

[Belgarath]

I don't agree, but maybe I'm missing something. As an aside, my apologies for not reading this carefully enough - I was assuming calendar year, so yes, there's a break, but it still has no effect) I threw in the break year reference originally because if (and now clearly there is) there is a break year, they could use the 1-year holdout rule, but this is almost never used in a 401(k) plan, as it could ultimately require retroactive entry.

Assuming you aren't using the one-year hold-out rule, to disregard the prior service under the rule of parity, the number of breaks required is the GREATER of (5) or the aggregate number of pre-break years. Since there is only 1 pre-break year, 5 is the applicable number, so with only one break year, the service isn't disregarded under the rule of parity. (and technically, the rule of parity only applies to someone who was a PARTICIPANT anyway)

Am I missing something?

Mr. Bagwell and I were obviously replying at the same time...

[Tom Poje]

the old Accudraft document provided the following scenrios

Reemployment of an Employee Before a Break In Service and Before Eligibility Requirements Are Satisfied. For any Plan Year in which the eligibility requirements under Section 2.1 are based on Years of Service, if an Employee Terminates Employment with the Employer prior to satisfying the eligibility requirements in Section 2.1 and the Employee is subsequently reemployed by the Employer before incurring a Break in Service, then (1) the Employee's pre-termination Year(s) of Service (and Hours of Service during any computation period) will be counted in determining the satisfaction of such eligibility requirements, and for all other purposes, as applicable, and (2) the Eligibility Computation Period, Vesting Computation Period, and/or benefit accrual computation period, as applicable, will remain unchanged.

Reemployment of an Employee Before a Break In Service and After Eligibility Requirements Are Satisfied. For any Plan Year in which the eligibility requirements under Section 2.1 are based on Years of Service, if an Employee Terminates Employment prior to the Employee's Entry Date in Section 2.1, the Employee had satisfied the eligibility requirements in Section 2.1 as of the Employee's Termination of Employment, and the Employee is subsequently reemployed by the Employer before incurring a Break in Service, then (1) the Employee will become a Participant as of the later of (A) the date that the Employee would enter the Plan had he or she not Terminated Employment with the Employer, or (B) the Employee's Reemployment Commencement Date, (2) the Employee's pre-termination Year(s) of Service (and Hours of Service during any computation period) will be counted for all purposes, and (3) the Vesting Computation Period and/or benefit accrual computation period, as applicable, will remain unchanged.
Reemployment of a Participant Before a Break In Service. For any Plan Year in which the eligibility requirements under Section 2.1 are based on Years of Service, if an Employee Terminates Employment after becoming a Participant and is subsequently reemployed by the Employer before incurring a Break in Service, then (1) the reemployed Employee will reenter the Plan as of the Employee's Reemployment Commencement Date, (2) the Employee's pre-termination Year(s) of Service (and Hours of Service during any computation period) will be counted for all purposes, as applicable, and (3) the Vesting Computation Period and/or benefit accrual computation period, as applicable, will remain unchanged.

Reemployment of an Employee After a Break In Service and Before the Entry Date. For any Plan Year in which the eligibility requirements in Section 2.1 are based on Years of Service, if an Employee Terminates Employment with the Employer either prior to or after satisfying the eligibility requirements in Section 2.1 (but before the Employee's Entry Date in Section 2.1) and the Employee is subsequently reemployed by the Employer after incurring a Break in Service, then the Employee's Years of Service that were completed prior to the Break in Service will be recognized.

Reemployment of a Participant After a Break In Service. For any Plan Year in which the eligibility requirements under Section 2.1 are based on Years of Service, if an Employee (1) was a Participant in the Plan, (2) Terminates Employment with the Employer, and (3) is subsequently reemployed by the Employer after incurring a Break in Service, then the Employee's Year(s) of Service that were completed prior to the Break in Service will be recognized.

Ignoring Service for Eligibility If Service Requirement for Eligibility Is More Than 1 Year of Service. Notwithstanding anything in the Plan to the contrary, if this Plan (or a component of the Plan) provides at any time that an Employee must complete more than one (1) Year of Service for eligibility purposes, and such Employee will have a 100% Vested Interest in the Participant's Account (or the sub-Account that relates to such component) upon becoming a Participant in the Plan, then with respect to an Employee who incurs a Break in Service before satisfying such eligibility requirement (1) the Employee's Year(s) of Service (and Hours of Service) that were completed prior to the Employee's Break(s) in Service will not be counted for eligibility purposes, and (2) the Employee's Eligibility Computation Period will commence on the Employee's Reemployment Commencement Date and subsequent Eligibility Computation Periods will be based upon the provisions of the definition of Eligibility Computation Period (with the Reemployment Commencement Date substituted for the Employment Commencement Date, if applicable).

[Mr Bagwell]

Belgarath,

No harm, no foul. Are we on the same page that the employee would be a Participant on date of rehire on 8/15/2016?

Thanks

[My 2 cents]

Note that under ERISA (at least my understanding of ERISA), work a year and then have a 1-year break does NOT result in losing the first year. Service is not lost unless the break consists of 5 consecutive years.

[Belgarath]

Mr. Bagwell - yes, 8/15.