Eligibility Description

[Good401(k)]

Have a 401(m) plan, looking at eligibility requirements.  Plan sponsor is composed of approximately 60% full-time hires and 40% .4 FTEs or less (most of this group are .01 or .1 FTEs).  Sponsor would like to set eligibility as follows:

Age: 21

Minimum Service: "employee regularly works more than 20 hrs per week"

Initial eligibility would be determined by employee FTE at hire date (per employment contract).  If .5 or higher - eligibility would be met and employee would enter next payroll period.  If employment contract is for less than .5, employee would be ineligible unless worked more that 1,000 hrs in plan year.  In this case, employee would enter next payroll period following the completion of the year of service (e.g. 1000hrs).

Looking into whether the service requirement (and eligibility procedure) would meet 410(a)(1)(A).  Relius - the plan document provider - says yes, as the procedure would identify employees meeting the 1,000 hrs requirement and would include them in the plan (and therefore meeting 410(a)(1)(A)).  But I'm slightly uneasy as I haven't seen any precedent for this procedure.

Welcome any thoughts.

[Mike Preston]

Relius is right.  What you have described is SOP for any plan which attempts to restrict eligibility.

[K2retire]

18 hours ago, Mike Preston said:

Relius is right.  What you have described is SOP for any plan which attempts to restrict eligibility.

It's also a provision that is frequently administered incorrectly!

[Good401(k)]

Great, thanks for the input folks.  Agree on the trickiness of administering, will be doing a bit of consulting to establish the procedures they'll need to follow to accurately track.

Again, many thanks.