Early Entry - Early Eligibility 401(k) Plan

[KTB]

Making sure I can wrap my head around early eligibility. If calendar year plan is setup for 83 hours a month in first three months, consecutive months, enter monthly - with 1 year and 1,000 hours (plan year) as subsequent - if someone is hired 5/8/17 and doesn't work 83 hours each month by 8/7/17, then they have to work 1,000 in plan year 2017 to enter 1/1/18. If not, they have plan year 2018 to get 1,000 hours and enter 1/1/19, correct? Or am I missing something? 

[401king]

Are you sure that the 3-month requirement must be the first three months? 

The Year of Service wouldn't accrue until their anniversary date - 5/7/2018; entering 6/1/2018. 

[KTB]

Well, that is what the 'initial eligibility period' would be. Whatever the initial eligibility requirements are, correct? So it would be the first three months? I don't know exactly, so thinking about loud. That is why I need some clarification..

[KTB]

Using a Pro-Type NonStandardized Document by Sungard

[BG5150]

Call Sungard.

[KTB]

Yah, I might have to. I did just pull out the plan document and it says the first initial eligiblity computation period is the anniversary year of the employee. So, in the above example,  I guess they would have the entire first year to work 3 consecutive months of 83 hours each and then enter the next month. Otherwise, if that first year goes by and they don't, then it reverts to the way the adoption agreement is setup (plan year) in which they would have to work 1,000 hours in a year and enter the next month. Does that sound better to anyone?!

[Belgarath]

Not entirely sure exactly what option you are using, nor how it is worded. For example, if you are using 3 consecutive months from employment commencement date during which at least 249 hours of service are completed, then you wouldn't need 83 hours in each month. You could have 5 hours in month 1, 5 hours in month 2, and 239 hours in month 3, for example - or lots of other possible combinations. But if you don't make the 239 in that first 3 month period, then you'd revert to the 1 yr/1,000 hour, measured from the date of employment. You may have a different type of option chosen, or be using an "other" election that you've filled in. As BG suggested, contact Sungard (now FIS) if you can't determine it based upon the election(s) in your AA.

[BG5150]

Don't confuse eligibility period being the plan year and a YOS.

My thought is that it is a constant rolling three-month window, even after a year.  Also, with a caveat, that if someone does work 1,000 hours in a 12-month period, they enter the plan on the next entry date.

What changes is the window, so to speak, for a YOS.  Typically, it is the EEs anniversary year.  After that, it reverts to the plan year.

 

 

[Belgarath]

Hi BG - if I understand what you are saying (and I may not) then I respectfully disagree - making a lot of assumptions about what is truly elected in the document. If truly as I posited, the initial computation period is a 3 consecutive month period, measured from date of hire (analogous to the normal 1 year/1,000 hour calculation - just for 3 months instead of an entire 12-month initial computation year) Once past that, your "3 month" computation period is gone - it isn't a rolling period. Now it is just "normal" 1 year/1,000 hours, measured from date of hire. And it will either revert to plan year after initial 1-year period, or be calculated on employment anniversary years, depending upon what option elected in the AA.

[KTB]

Updated: Looking in the Sungard Plan Document:

Definition of Initial Eligibility Computation Period: The initial Eligibility Computation Period is the Employee's Anniversary Year which begins on the Employee's Employment Commencement Date.

Definition of Subsequent Eligibility Computation Period: A Subsequent Eligibility Computation Period is any Eligibility Computation Period after the initial Eligibility Computation Period, as the employer elects in its Adoption Agreement.

Subsequent in this case in the adoption agreement reads "Plan Year - The Plan Year Beginning with the Plan Year which includes the first anniversary of the Employee's Employment Commencement Date"

Adoption AGreement option chosen is: 

(i) [X] Three (3) month(s) with at least 83 Hours of [ ] OR [X] [ ] [ ] [ ]
Service in each month (not exceeding 12 months for Elective Deferrals, Safe Harbor Contributions and SIMPLE Contributions and not exceeding 24 months for other contributions). If more than 12 months, 100% vesting is required. If the Employee does not complete the designated Hours of Service each month during the specified monthly time period, the Employee is subject to the one Year of Service (or two Years of Service if elect more than 12 months) requirement as defined in Election 16. The months during which the Employee completes the specified Hours of Service (Choose one of (1) or (2).):
(1) [X] Consecutive. Must be consecutive.

So - Belgarath: Are you saying it is #1 or #2 below?

1) 1st time period to become eligible is in the first anniversary year. If fail to meet the 3 months of 83 hours, then it reverts to the subsequent period, or Plan Year (in this case calendar year). 

2) 1st time period to become eligible if the first 3 months. If fail to meet the 3 months of 83 hours, then they revert to the 1,000 hours in first anniversary year (and don't get a chance to work another 3 consecutive months of 83 before 1st anniversary year is up)? 

[Belgarath]

I'm not sure - it looks like the formatting is off under the adoption agreement section you pasted in, and I'm finding it confusing. Can you take a look at it and see if it is correct as shown?

[KTB]

The boxes after the listing are for where the words actually go. So it really reads "(i) [X] Three (3) month(s) with at least 83 Hours of Service in each month". Both the 3 and 83 are items we typed in for the plan. Does that help? 

[401king]

At any time if they complete 3 consecutive months with 83 hours in each month then they become eligible. If they do not do that in the first  anniversary period (within 12 months of their date of hire), then you check if they worked 1000 hours during the anniversary period. If not, then revert to the Plan Year for the Year of Service eligibility, but they can still meet eligibility at any time by completing 3 consecutive months with 83 hours in each month.

[Belgarath]

What FIS document is this? We use the PPA VS in AA format, and it reads very differently, (and IMHO is much clearer). Ours doesn't have quite the same option as yours, and the closest choice is this - underlining is my emphasis:

_____(not to exceed 12) consecutive month period from the Eligible Employee's employment commencement date and during which at least ______(not to exceed 1,000) Hours of Service are completed. If an Employee does not complete the stated hours of Service during the specified time period, the Employee is subject to the 1 year of service requirement in i above.

I'm honestly not sure how I'd interpret yours, and I would probably ask FIS to clarify. Our document (and I had this confirmed by FIS) would be that if you don't work the requisite number of hours in the initial 3 month period ONLY, then you revert to the "Year of Service" standard, and there are no subsequent 3 month measurement periods - even in the first year.