Can years of employment, prior to plan's existence, be used to meet th

[Moe Howard]

An employer starts a profit-sharing plan, effective 01/01/2001. The adoption agreement states the eligibility requirement to be "age 21 & 2 years of service".

On 01/01/2001, one of the employees is 30 years old and has worked full time for the employer since year 1995.

Does this mean that he immediately enters the plan on 01/01/2001 (since he has already met the age & service requirements) .... or is there something in ERISA that says employemnt/service prior to the plan's existence is not allowed to be counted toward meeting the "eligibility service requirement" ??

[wmyer]

According to the definition for years of eligibility service in 410(a)(3)(A), service begins on the employment commencement date. This is regardless of whether the plan exists yet or not. You are correct that the employee should come in on 1/1/2001 when the plan begins, as he has already met the eligibility requirements.

[Erik Read]

The document can specify if years of service prior to the plan effective date will be considered or not. Some formulas are based on service, and the entry date can have an effect on the contribution(s) the employer may need to make at year end.

In most cases though - yes, the participant would be immediatly eligible to enter the plan.

[Wessex]

I don't believe there is any exclusion permitted for eligibility service credited prior to the inception of a plan. There are no eligibility service exclusions. Eligibility service can be disregarded only after breaks in service. See Sections 410(a)(3) and (5). Unlike for eligibility service, there is such an exclusion (among others) for vesting service for service credited prior to inception of the plan. See Section 411(a)(4).

[Erik Read]

Wessex - your right. Don't know what I was thinking about. Vesting is were you can limit the beginning period, not for actual service.

Thanks!