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Eligibility Question - Consecutive Months of Service and YOS


Rai123

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We use FIS IDP pre-approved plan documents and have submitted the question to them. However, I wanted to post on here as well to see if anyone may know.

The plan document uses failsafe YOS language when we enter eligibility that's less than one year and includes hours. See language below for the plan in question: 

(a) Eligibility. Any Eligible Employee who has completed 167 Hours of Service within 2 consecutive months from the initial date of employment and has attained age 21 shall be eligible to participate hereunder as of the date such Employee has satisfied such requirements. Notwithstanding the foregoing, any Employee who has completed a One-Year of Service shall be deemed to have met the service requirement. 

Plan Entry Dates are 1st of the month.

Our understanding of the eligibility above is that if an employee does not complete 167 hours in 2 their first two consecutive months of employment. They have to complete 1000 hours in 12 months. 

For example, if an employee was hired January 23, 2023, on March 23rd they completed 2 months of service and on April 1st they would enter the plan as long as they completed 167 hours within the 2 months.

However, what if the person only complete 80 hours in the 2 consecutive months. They are not eligible to enter the plan on April 1st, correct? They will now need to complete a year of service which is 1000 hour within 12 months?

Let's assume they completed 1000 hours by September 15, 2023. Do you agree that they would be eligible to enter the plan on that date? Some of the confusion here that a few of us believe that the year of service means that they have to complete 12 months of service (January 23, 2023, to January 23, 2024, and the 1000 hours) However, I disagree i believe a YOS only means 1000 hours in this case.

 

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The plan document should contain a definition of Year of Service for eligibility purposes. What does it say?

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.
corey@pppc.co

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What C.B. said. The document should address this question.

I will say that in my experience, once you miss the initial 2-month eligibility, most of the time you would be looking at a Year of Service (usually, but not always 1,000 hours in the "eligibility computation period" of January 23, 2023 to January 22, 2024), and the entry date would be February 1, 2024.

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thank you both this is the definition for a Year of Service in the plan document. @Belgarath I believe you are correct based on the definition below. I'll wait to hear back from FIS as well though. thanks!

 

1.113   "Year of Service" means the computation period of twelve consecutive months, herein set forth, and during which an Employee has at least 1,000 Hours of Service. However, the Employer may amend the Plan to provide a lesser number of Hours of Service in a Plan amendment for eligibility purposes, vesting purposes, or accrual purposes without adversely affecting the Plan's reliance on the IRS Opinion Letter.

 For purposes of eligibility for participation, the initial computation period shall begin with the date on which the Employee first performs an Hour of Service. The participation computation period shall shift to the Plan Year which includes the anniversary of the date on which the Employee first performed an Hour of Service. If there is a shift to the Plan Year, then an Employee who is credited with the required Hours of Service in both the initial computation period and the Plan Year which includes the anniversary of the date on which the Employee first performed an Hour of Service, shall be credited with two Years of Service for purposes of eligibility to participate.

 A Year of Service for eligibility purposes is not credited until the end of a participation computation period.

 For vesting purposes, the computation periods shall be the Plan Year.

 The computation period shall be the Plan Year if not otherwise set forth herein.

In the event the method of crediting service is amended from the elapsed‑time method to the hour‑of‑service method, an Employee will receive credit for Years of Service equal to:

(a)   The number of Years of Service equal to the number of One‑Year Periods of Service credited to the Employee as of the date of the amendment; and

(b)   In the computation period which includes the date of the amendment, a number of Hours of Service (using the Hours of Service equivalency method elected in the Plan) to any fractional part of a year credited to the Employee under this Section as of the date of the amendment.

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