Rules of Parity Cheat Sheet

[austin3515]

see the attached.  I'm very happy with this. Every time rule of parity would come up I would research for an hour.  I finally wrote this down.

Let me know what you think!  I would incorporate suggestions and reshare.

[Edited to add revised pdf, 1/24/2021 in the early am][Edited to reattach the revised PDF per suggestions/corrections].

 

Rehires And Rule of Parity.pdf

[ESOP Guy]

It looks like your 2nd and 4th column are basically a repeat.

You have the two big ones in my opinion.   If they ever deferred or had any vesting in the past you have to give them their old service.   Those two rules means 90%+ of the time you have to give them their old service back. 

 

That is so true that I have reached the point that I think most plans ought to be written to simply give everyone their service back.   It would save you hours of research (or feel the need to make a cheat sheet) to get to that point 90%+ of the time.   😀

[austin3515]

12 hours ago, ESOP Guy said:

It looks like your 2nd and 4th column are basically a repeat.

Precisely a repeat! Whoops!  Obviously there was some reconfiguring/ordering going on.   Thanks for looking at it!  I revised the attachment in the first post.

[QualGeek]

Nice summary, thanks for sharing - typo in the first word?  "Rehies"

[RatherBeGolfing]

👍

[Griswold]

Thanks! Missing a word here at the start of the last paragraph: "The rule of parity can be only applied with respect to the service a Participant."

[austin3515]

Fixed typo and Griswold's suggestion.  Thanks guys!! Reattached in the original post!

People in the office seemed to like it too.  I hope this gets some use out there!

[duckthing]

Very handy. Thank you, Mr. Powers!

[DJL]

Yes, thank you!  Always helpful to have a visual approach to solving the question.

[Jakyasar]

Thank you for the attached.

Here is a question for a DB plan - out of curiosity as was just presented to me a few minutes ago. Plan requires 1000 hours for accrual and vesting. It is EOY val.

Date of hire: 12/1/2018

Calendar 2019 worked over 1000 hours

Date of participation: 1/1/2020

Date of termination: 3/31/2020 - 750 hours from 1/1/2020 to 3/31/2020

As of 3/31/2020 did not accrue any vesting service i.e. terminated with 0% vesting.

Rehired 10/1/2020 and accrued another 500 hours of service for a total service in excess of 1000 hours for 2020. No Break-in-service.

Language from the document - the box is not checked

[ ] Rule of parity. If an Employee does not have any nonforfeitable right to the Accrued Benefit derived from Employer contributions, exclude eligibility service before a period of five (5) consecutive One-Year Breaks in Service/Periods of Severance.

[ ] Rule of parity. If an Employee does not have any nonforfeitable right to the account balance derived from Employer contributions, exclude Years of Vesting Service earned before a period of five (5) consecutive One-Year Breaks in Service/Periods of Severance.

The way I read this (might be totally wrong) since not checked, this participant continues to be active for 2020 and accrues a benefit and also vesting service.

Your comments are appreciated.

[Jakyasar]

I have a situation and I use the cheat sheet Austin3515 provided long time ago.

Paragraph 4 of the attached states:

“The rule of parity can be only applied with respect to the service of a Participant. If an individual never met the eligibility or plan entry date requirements; if they terminated before the Plan was effective; or if they were excluded from participation in the Plan, their service cannot be disregarded under the rule of parity.

A calendar plan with standard eligibility age 21/1 year service (1000 hour requirement) and dual entry date.

A rehired employee was never a participant prior to rehire so that means (according to above), their service cannot be disregarded. 

Employee in question was rehired 5/1/2024 and worked 1000+ hours thru 5/1/2025 but did not work 1000+ hours during calendar 2024.

He was an employee some years ago (2 scenarios, 1- did not have 5 breaks in service and 2 did have 5 breaks in service)

It the statement above correct from the cheat sheet is correct then, since he never worked 1000+ hours at any given 12-month period in the past, the fact that he worked 1000+ hours from 5/1/2024 to 5/1/2025 is no longer relevant and he should not be eligible on 7/1/2025 since he also did not work 1000+ hours during calendar 2024.

 The 1000+ hours from 5/1/2024 to 5/1/2025 method would have applied if and only if his was never employed prior to 5/14/2024.

 He worked 1000+ hours in calendar 2025 and therefore eligible 1/1/2026.

What am I not reading/understanding here or am I making a correct statement or am I making sense?

Thank you