eligibility

back to basics and apologies for the simplicity of the question!

If a plan has six months of service, can they also have an hours requirement (i.e. 500 hours in six months)?

I thought I remembered from WAY back that if you had less than 1 YOS for eligibility that you could not have an hours of service requirement.

However VS Plan Doc "seems" to allow it under the eligibility section but I had a client years back that had six consecutive month for eligibility and under IRS audit had employees that were required to participate that we thought could be excluded.  the service spanning rules were cited, which I think might tie in to all this, but am really spinning wheels now.

thanks in advance.

lets change your question a little to being 600 hours in a 6 month period.

Fred works 520 hours first 6 months. he works 520 hours the next 6 months. as long as your document also contains language that lets anyone into the plan who completes the 1000 hours in a 12 month period you should be ok. this is, at least I think, default language in most plan that use an hours requirement for a shorter period of time.

FT William document has the following

NOTE: Hours of service failsafe: if B.10a.vi - B.10a.viii is selected and the Plan uses the Hours of Service method, the service requirement under B.10 shall be deemed met no later than the end of an Eligibility Computation Period during which the Eligible Employee completes 1,000 Hours of Service; provided, that the individual is an Eligible Employee on the applicable entry date.

Ditto on what Poje stated.  You can go either way.  You can say "6 months of elapsed time" or "6 months with a certain number of hours".  If you go elapsed time, then the service spanning rules would apply.  If you go with hours, then you may use any amount of hours (up to 1000), but would need to caveat that should you fail to meet that requirement, then you'll meet eligibility after working 1000 hours during 12 months.

Another think to watch out for:  Many documents give the requirement on the first try.  Hence, if you fail to work the (let's say) 520 hours in the first 6 months, then you don't get another 6 month computation period.  Going forward, you must work 1000 hours in 12 months to meet eligibility.

It's very important to understand the language in your document and ensure it is consistently applied to the plan's operation. This will keep you away from a lot of trouble.

Good Luck!

17 hours ago, pmacduff said:

I thought I remembered from WAY back that if you had less than 1 YOS for eligibility that you could not have an hours of service requirement.

I was taught that way back also.  Not sure if something changed in the law or it that was simply taught as a safe way to not have a problem. 

However, the other two answers are the current thinking on the subject. 

Thinking "out loud" here. Say you wanted 6 months with 500 hours (and had the 1 YOS failsafe). Would you keep using successive six-month periods, or flip to the plan year? Say someone's hired on 10/1/18. They work six months through 3/1/19, but don't complete 500 hours. Would you give them another six-month period from 3/1/18 through 8/1/18? Or switch to plan year and look at 1/1/18 through 7/1/18? Or is it just administrative preference?

EBECatty the document should dictate whether or not you switch to the plan year.

Everyone - thanks for your thoughts and responses.  This not only clarifies it for me but also tells me why we don't see this that often!  It could get cumbersome doing all of the tracking esp. if there is a large employee base.  I have a client with 6 months of service elig. who wants to add an hours requirement to keep some people out.  They don't use safe harbor and have run into ADP test issues.  However they also don't want to add safe harbor (too expensive) or go to a year of service, 1000 hours.

Not only is the cumbersome but I find the service spanning rules and how they relate to rehires to be some of the hardest rules to apply at the practical level. 

Unfortunately too many documents get written by people who don't have to do the day to day work on them. 

I once had an ESOP that had as its date of entry every day of the year with a 6 mo wait.  Bad enough for all the reasons you have given.  They then added on that the plan uses compensation from date of entry.  There is no payroll system that can give you a person's comp from a particular day to 12/31 efficiently.  This company had a lot of turnover so there were hundreds of people who entered every year.  They finally had to amend the plan to change entry to 1st of every month because their own HR was complaining about me demanding all this crazy data. 

I think in Shakespeare's story McDuff kills MacBeth because of the insistence of working on a plan that had eligibility like that.

guess Pmacduff wants to continue that?

At least the line "Double, double toil and trouble; Fire burn, and cauldron bubble." implies such headaches!

(hey, it's Friday, best I can do on the spur of the moment.)

I remember my 9th grade English teacher got such a kick out of having me read the McDuff part when we read MacBeth and I always thought that "McDuff" in MacBeth was spelled incorrectly. 

Don't know how accurate it is but my paternal Grandfather told us that we were "Mac" because we were Scottish and that "Mc" was Irish.  He was pretty particular about that distinction!

Forsooth, she putteth in such eligibility and then sayeth