When does an employee cease being an "Employee" for plan pur

[John A]

When does an employee cease to be an "Employee" for plan purposes?

An employee is planning to have their last day of work be Friday, September 29. Saturday, September 30 is the last day of the plan year, and the plan requires a participant to be an "Employee" on the last day of the plan year to get the match. Saturday is not a typical work day for the company. If the plan document defines "Employee" as: a common law employee, does the participant get a match or not? Does it matter if the employee has accrued vacation time as of September 29? Can the Plan Administrator decide how the plan will be interpreted in this situation?

Have other threads discussed this (or similar) issues?

Thanks.

[Jon Chambers]

Here's an uncited but practical response. Assuming that the employee works a full day (or is fully paid) for Friday, they don't separate from service until Monday, the first day that they don't show up for work. This is after September 30, so they get the contribution. I've often adopted this approach where the Plan Year ends on December 31, which is a holiday for many companies, and employees are leaving to take a new job in the New Year. It just seems to me to be unreasonably punitive to not give the employee the benefit of the doubt when they don't clearly separate before the end of the year. Of course, as I said, this is an uncited practical interpretation. And it should be adopted uniformly (no giving "good" employees the benefit of the doubt, while penalizing "bad" employees. Others may have differing opinions. I'll be interested to follow the thread.

[Guest Tim Brown]

I would agree with Jon, but as our VP would say, I've never seen an "controlling legal authority" on the issue. I have always been of the opinion that if the last day of the year did not fall on a normal working day, then anyone whose last day was the last working day of the plan year, then they should be considered still an employee on that day.

[rcline46]

I have been in employee benefits working for a TPA for over 25 years. We have ALWAYS considered anyone working on the last workday of a year as being employed on the last day of the plan year.

There is no known legal interpretation or regulation addressing the situation.