DB Participant terminates with 800 hours of service

[SSRRS]

Hi,

Thank you, as always, for all of your help and insights. May we all be safe. A DB Plan has a 1,000 hour requirement to enter plan and to be eligible to accrue a benefit for the respective year.  However, once an employee enters the plan, even if his annual hours of service dips below 1,000 he will still be eligible (although won't earn additional vesting, since only vests an additional 20% per year that had 1,000 hours of service).Question : What If a participant in a DB Plan terminates in middle of the year with 800 hours, will he accrue a benefit for this final year? Thank you.

[Lou S.]

You say he needs 1,000 hours for accrual but only worked 800 hours so no, he does not accrue a benefit.

If there is some other rule in the plan that would cause him to be credited with an accrual, or partial accrual year, then he might qualify but you'd have to RTD.

[SSRRS]

6 minutes ago, Lou S. said:

You say he needs 1,000 hours for accrual but only worked 800 hours so no, he does not accrue a benefit.

If there is some other rule in the plan that would cause him to be credited with an accrual, or partial accrual year, then he might qualify but you'd have to RTD.

 

Thank you very much. Once an employee who was working 1,000 hours each year, entered the plan, then even if down the line his hours drop under 1,000 he will still be eligible (since he is in the plan already- the under 1,000 hours will not make the employee an otherwise excludable). Is this case different, since the employee terminated (as opposed to an active employee who's hours went down)? Thank you.

[C. B. Zeller]

3 hours ago, SSRRS said:

Thank you very much. Once an employee who was working 1,000 hours each year, entered the plan, then even if down the line his hours drop under 1,000 he will still be eligible (since he is in the plan already- the under 1,000 hours will not make the employee an otherwise excludable). Is this case different, since the employee terminated (as opposed to an active employee who's hours went down)? Thank you.

Nothing in the Code requires this. Your plan document might.

[Bill Presson]

On 9/11/2020 at 12:51 PM, SSRRS said:

Thank you very much. Once an employee who was working 1,000 hours each year, entered the plan, then even if down the line his hours drop under 1,000 he will still be eligible (since he is in the plan already- the under 1,000 hours will not make the employee an otherwise excludable). Is this case different, since the employee terminated (as opposed to an active employee who's hours went down)? Thank you.

You say he will "still be eligible" but you need to define eligible for what? No he doesn't get kicked out of the plan, but there are rules delineating who gets a year of vesting, who is eligible for a top heavy minimum benefit and who accrues an additional benefit for the year.  This employee may be eligible for one or more or none of those items.