Once-eligible, always-eligible rule and rehires / reclassifications of employment.

Situation 1 - Rehire

Full-time employee is eligible and participating in the 403(b).  The employee experiences a separation from service and there is no plan to re-hire employee.

Employee ends up being re-hired later in the same Plan Year, but in an ineligible position (fewer than 20hrs/week).  Does the employee get to participate immediately under the "once-eligible, always eligible" rule?  

Situation 2 - Reclassification

Full-time employee is eligible for the 403(b).  The employee changes from full-time to part time (expected fewer than 20 hrs/week).  Is the employee still eligible under the "once eligible, always eligible" rule, or is the employee now ineligible under the exclusion for employees expected to work fewer than 20 hrs/week?

I am unsure about the first situation, however, it is my understanding that the employee in Situation 2 remains eligible to participate in the plan despite falling below 20 hours/week.

Also, you may want to review this thread as it seem relevant to Situation 1:

Situation 1 was actually addressed here:  https://www.tax.gov/ClarifyingTheUniversalAvailabilityAndOther403bRetirementPlanRequirementsOct272016/

Listen to questions 3 and 4, they deal with the same situation:  A full time employee terminates and is rehired under 20hr/week, which is excluded under the Plan.  According to the IRS, that person should not be allowed to defer after rehire if they fall into the 20hr/week category (i.e. they are expected to work less than 20hr/week).

My commentary:  The situation is tricky.

• You must exclude the employee, otherwise you blow the "less than 20hr/week" rule and then have to include everyone else in that category.
• However, situation 2 is different -- you must INCLUDE the employee under "once-in-always-in."  And, further, if the person terminates and is rehired at under 20hr/week, but there was a plan when the person was terminated to rehire her later, you are looking at situation 2 (and the person must be included).
• The problem is, if you mess up the rule, you have a bigger problem than you started with. 
• Also, with the "long-term-part-time" rule coming out, the "less than 20hr/week" rule probably loses a lot of its value.