Eligibility question

[BG5150]

Fact Pattern:

 403(b Plan EXCLUDES employees who normally work less than 20 hours a week.

 Employee was working full time for a few years and now is on an abbreviated schedule of 15 hours a week.

 Question:

 Does this person continue as a participant in the plan?  Or are they now no longer a participant because they are in an excluded class?

 

[Carol V. Calhoun]

They must be permitted to continue in the plan under the "once-in-always-in" rule of Notice 2018-95.

[BG5150]

Thanks.  That's what I thought, but I was tripped up with the universal eligibility aspect.

To me, like in a 401(k) plan, if someone moves to an excluded class, they are no longer eligible to participate.

[Carol V. Calhoun]

18 hours ago, BG5150 said:

Thanks.  That's what I thought, but I was tripped up with the universal eligibility aspect.

To me, like in a 401(k) plan, if someone moves to an excluded class, they are no longer eligible to participate.

However, an excluded class in a 401(k) plan cannot be defined with reference to age or service.  So for example a part-time employee who moves to full-time and then back to part-time, but accumulates a year of service in between, remains eligible for the 401(k) plan.  This is pretty much the same as the rule for a 403(b) plan.

This contrasts with a situation in which someone moves into a different class of employee.  For example, if a plan covers only salaried employees, an hourly employee who becomes salaried and then reverts to being hourly would lose eligibility.