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Years of Service "1000+ hours"?

Guest tz

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May a governmental plan (a defined contribution plan) require more than 1000 hours for a "Year of Service" for participation and eligibility purposes? Generally, governmental plans are exempt from the 401(a)(3) minimum participation rules (of 410) and exempt from the 401(a)(7)vesting requirements (of 411 (except for 401(a)(4) and 401(a)(7) requirements in effect on 9-1-1974 (i.e. 100% vesting rules at NRA and plan termination etc.)). Am I missing something here? Thanks.

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So many times the answer seems to be that a governmental plan can do almost anything unless it is prohibited by the terms of the plan itself or by state law. I often see govt. plans that utilize provisions that would apply to an ERISA-covered plan, such as defining a year of service using the 1000-hour rule, even though the plan is not required to use such language.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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Welcome to the board!

In general, I'd say you are right. However, there are a couple of caveats here:

  1. If this is a governmental plan other than a plan of a state or local government (e.g., a plan of a federal government agency or international organization), it may be subject to pre-ERISA section 401(a)(3) due to Code section 410©(2), typically beginning with the plan year beginning in 2001. Notice 99-40. Although this year's tax bill was supposed to modify this result, the prospects for it passing this year are looking dim at the moment.
  2. As is usual with governmental plans, you need to consult applicable state and local law, as well as federal law, on this issue.

And by the way, if this is a state or local government plan, it would not be subject to the pre-ERISA Code section 401(a)(4) rules on vesting, due to Code section 401(a)(5)(G).

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The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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