1,000 Hour Requirement For Short Plan Year

[metsfan026]

I just wanted to make sure I was correct.

Cash Balance Plan is terminating as of July 31, 2022.  In order to calculate the 2022 requirement, they can maintain the 1,000 hour requirement correct? 

[Effen]

What "requirement" are you referring to?  Benefit accruals?  Assuming this is a calendar year plan and you are terminating on July 31st, and assuming your plan requires a 1000 hours to accrue a benefit, then yes, the 1000 hour requirement is still relevant.  Termination date isn't really relevant, but the freeze date is. If accruals were frozen before anyone earned 1000 hours, then no accrual for 2022.  

If your question was about minimum funding requirements, then it depends on if it is a beginning of year valuation, or an end of year valuation, and it depends on your hours assumption used in the valuation. There is room for creativity, but you just can't ignore it.  

 

[Lucky32]

However, if the plan wasn't terminating and the plan year was amended, a 1,000 hour requirement for accruals, eligibility, and vesting would need to be prorated for the resulting short plan year, right?

[Bri]

Vesting is typically granted under a DOL's regulation, where you end up with overlapping full 12-month measurement periods, rather than a proration of hours.  Accrual requirement hours are usually pro-rated, though.  And eligibility wouldn't typically prorate, but that could be addressed in the amendment creating the short plan year if the sponsor wants to cram more people in sooner than otherwise would be typical.