Working with Boomerangs: Breaks in Service and Rehired Employees
Among the more challenging eligibility questions that confront retirement plan practitioners are questions relating to rehired and part-time employees. When does a rehired employee re-enter / enter the plan? Can a plan exclude part-time employees? How may the plan define part-time employees? When and how do the break-in-service rules affect rehired and part-time employees? Does the one-year hold out rule apply to a 401(k) plan? What vesting years of service must the plan credit for a rehired employee? Does it matter whether the participant received a cash-out distribution? If the rehired participant is receiving distributions, do you stop the distributions? Surprisingly, these questions arise often. While these are frustrating issues in administration, they are also important considerations in plan design. Should the employer use break-in-service rules? How much good will they do? How much confusion will they cause?
- When do rehired employees re-enter / enter the plan?
- When and how do the break-in-service rules apply?
- Can you utilize the one-year hold-out rule in a 401(k) plan?
- When can the plan treat the rehired employee as a new employee?
- Distributions to rehired employees
- Crediting vesting service for rehired employees
After the seminar, attendees should be able to:
- Determine when a rehired employee enters the plan
- Apply the break-in-service rules correctly
- Determine whether the break-in-service rules will benefit an employer
- Determine when the plan may treat a rehired employee as a new employee
- Determine how to administer the eligibility rules where there is missing service data
Speaker: David Schultz, J.D.
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