Entry date for employee with service recognized from another employer

[AKconsult]

We provide recordkeeping services to 2 companies that are related, but not in a control group. They each recognize service with the other company for purposes of vesting and eligibility in their respective plans.

If an Employee leaves Company A to go to work for Company B, and his 7 years of service with Company A is recognized by Company B, when will he be able to enter Company B's plan? It seems like he should be able to enter immediately on his employment at B, but I can't find anything in the document that would substantiate that. Does he have to wait until the next semi-annual entry date? The plan allows quarterly deferral changes, not sure if that makes a difference? Thanks!

[Lou S.]

I might be tempted to treat him as a re-hired employee and follow those terms if it isn't directly addressed in the document.

I could be wrong but I'm guessing the client has this provision so the transfer from one company to the other is more seamless and that the employee would immediately be eligible but that's just a guess on my part.

Also I might look at what is written in the SPD on this situation.

[TPAJake]

Unless the document says otherwise, sounds like immediate entry. Maybe admin delay of one payroll period for paperwork, but I'm not sure you could keep them out until the next entry date because you're honoring his original date of hire & original entry date when you credit past service for eligibility. I'll definitely be watching for follow-ups on this one!

[ESOP Guy]

Remember also if it is decided the plan document doesn't address this situation all plan documents allow the plan administrator to make reasonable nondiscriminatory interpretations of the plan provisions.

In this case it sounds like you should make some recommendations to the plan administrator as to what they should and could do. (I agree with others the best decision is immediate entry) After precedent is set I would make sure that decision is documented and followed in the future.

There might even be some benefit to making a note so that the next time the two plans are amended or restated the decision actually be added to the plans so it is clear.

[chc93]

What about this... Employee is an "employoee" of Company A and Company B... but is in an ineligible class in Company B while employed with Company A. The day that he moves to Company B, he moves from an ineligible class to an eligible class, and is immediately eligible if he previously met the eligibility requirements of Company B while in the ineligible class.