Interesting eligibility question

[Belgarath]

Starting with the applicable plan language:

Rehired Eligible Employee who had not satisfied eligibility. If any Eligible Employee who had not satisfied the Plan's eligibility requirements is rehired after severance from employment, then such Eligible Employee shall become a Participant in the Plan in accordance with the eligibility requirements set forth in the Adoption Agreement and the Plan. However, in applying any shift in an eligibility computation period, the Eligible Employee is not treated as a new hire unless prior service is disregarded in accordance with Section 3.5(d) or (e) below.

Ok. The underlined language does NOT apply (that is, 3.5 (d() or (e) don't apply) in the following scenario, so we can ignore the underlined clause.

This is concerned with entry date. Plan uses age 21, 6 consecutive months with at least 500 hours for eligibility, entry date quarterly. If eligibility requirements not met in the initial specified time period (6 consecutive months with at least 500 hours) then the employee is subject to the 1 Year of Service requirement.

After the initial 12 month eligibility computation period, the computation shifts to Plan year, which is calendar.

Original date of hire, 6/6/2017 - Date of termination 8/20/2017. Had 200 hours of service. 

Rehire date of 8/2/2021 - had 833 hours in 2021, over 2,000 hours in 2022.

So, since the employee had not met eligibility prior to termination, then what is the entry date? Is it 4/1/2022? 1/1/2023? Other? It appears that since the employee is not treated as a new hire for the eligibility computation period shift, then the eligibility computation period shift has already occurred, and is now Plan Year 2021, then 2022, etc. 

Thoughts? 

 

[C. B. Zeller]

Seems like it would be 1/1/2023. The participant didn't complete the requisite number of hours in their first eligibility computation period, so the eligibility computation period switches to the plan year. The first plan year in which they completed 1,000 hours of service was 2022. So they enter 1/1/2023.

[truphao]

agreed with Zeller

[Belgarath]

Thank you. That's precisely the answer I came up with, but I was questioning myself... nice to have greater minds than mine agree!

[Paul I]

I also agree with Zeller.  This particular example is interesting because the rehire has to wait longer to become eligible because their prior service was not disregarded.  It seems like this particular individual would have entered the plan earlier in their prior service was disregarded, and there was no upside for them by continuing to recognize that prior service.  It is not unusual for a mix rehire rules, service rules and rules of parity to lead to some seemingly counterintuitive results.

[Belgarath]

Hi Paul - that's exactly the discussion I was just having with a co-worker about 10 minutes ago! Truth is stranger than fiction...

[MsKitty]

So, if the plan has quarterly entry dates, wouldn't the date of entry 10/1/22? If he had over 2,000 hours in 2022, let's suppose he got over the 1000 mark after July 1st, why doesn't he come in on 10/1/22? Thanks.

[Paul I]

IF the employee's eligibility computation period started upon rehire started on the 8/2/2021 rehire date, then yes the entry date would be 10/1/2022.

The circumstances here say the plan provisions shifted the ECP to a plan year for this participant and upon rehire, the employee needed to work 1000 hours in the year of rehire (and did not in this case).  The employee worked 1000 hours in the next ECP (1/1-12/312022) and entered the plan on 1/1/2023.  It's a wacky result based on an unusual combination of eligibility rules.

[MsKitty]

Thank you Paul for replying. I really appreciate it and your answer helped to clarify.🙂