Exclusion of a rehiree related

[Jakyasar]

I am not sure if the following is discriminatory, so checking out to be sure.

Company started 2 plans in 2025, both with vesting starting with inception of the plans (both calendar).

Joe terminated later 2025 (he quit) and gets no monies because terminated with 0% vesting in both plans. He was eligible as of 1/1/2025 (DOH goes back a few years)

The company wants to rehire him in 2026 so no break in service but want to exclude him from benefitting under both plans. He would have a unique job category.

So, if they sign an amendment now and then rehire him a few months later (all during 2026), is this a discriminatory approach?

Another approach is to have the amendment signed in 2026 but rehire him in 2027 but that is not what they want to do.

Thank you

[C. B. Zeller]

They can exclude him from both plans, by name or by job category, as long as it's not a service-based exclusion (including a disguised service-based exclusion). He would still be considered non-excludible so he would count against the coverage test (assuming he's a non-HCE).

However - and read your documents carefully to be sure - his prior accrued benefits (if any) may well have to be restored. You said he got no money because he was 0% vested; this implies that he accrued a benefit in 2025 but received a "deemed zero-dollar cash-out" upon termination. Re-hired employees have a right to have their forfeitures restored by repaying the distributed amount, so just like he was deemed to have been distributed $0 he would also be deemed to have repaid $0, and would be entitled to a restoration of forfeited accrued benefits.

If he is excluded from participation, he won't accrue any additional benefits, but he will continue to earn vesting service towards the benefits previously accrued.