Full Time to Part Time

If any employee has meet the eligible requirement(21/ 1 year/semi) and is now considered eligible, to date they have not contributed.  This employee is now no longer working full time and is  becoming a part time employee.  Can we now exclude them.  The documents says we can exclude"part-time, temporary or seasonal employees, i.e., employees whose regularly scheduled service is less than 1,000 Hours of Service during each 12-month eligibility computation period"   I'm leaning towards once they are in you can not exclude someone

Thanks

9 hours ago, wifrbr said:

The documents says we can exclude"part-time, temporary or seasonal employees, i.e., employees whose regularly scheduled service is less than 1,000 Hours of Service during each 12-month eligibility computation period"   I'm leaning towards once they are in you can not exclude someone

Thanks

Your document said that???  I believe that may have been taken out of context.  There is no service class exclusion.  You may provide a different eligibility for a service class, but you cannot exclude them merely because they are part of that service class.

Good Luck!

42 minutes ago, wifrbr said:

If any employee has meet the eligible requirement(21/ 1 year/semi) and is now considered eligible, to date they have not contributed.  This employee is now no longer working full time and is  becoming a part time employee.  Can we now exclude them.  The documents says we can exclude"part-time, temporary or seasonal employees, i.e., employees whose regularly scheduled service is less than 1,000 Hours of Service during each 12-month eligibility computation period"   I'm leaning towards once they are in you can not exclude someone

Thanks

Yeah you need to read your document again and very closely.  I have seen a few documents that say something about part-time employees are excluded and they define the term part-time like you have written.  But to over come the concerns ETA is bring up it clearly says if they ever work 1,000 hours in a 12 month period they enter the plan.  The practical effect of this "class" exclusion is it is another way of saying you don't enter until you work 1,000 hours. 

Yes is states,, if as a part-time, temporary or seasonal employee, you complete one (1) Year of Service as defined below, you will at that point no longer be treated as a part-time, temporary or seasonal employee

So this ex full time  employee who has worked more than 1000 hours in the past  can not ever be excluded?  Once you are in you are in?  Can't exclude now because he worked less than 1000 hours per year?

3 hours ago, wifrbr said:

Yes is states,, if as a part-time, temporary or seasonal employee, you complete one (1) Year of Service as defined below, you will at that point no longer be treated as a part-time, temporary or seasonal employee

 

So this ex full time  employee who has worked more than 1000 hours in the past  can not ever be excluded?  Once you are in you are in?  Can't exclude now because he worked less than 1000 hours per year?

Now you seem to be mixing topics.  Can you have allocation conditions that require 1,000 hours to get an allocation?  Sure, as long as you can pass coverage testing. 

One question is asking are you a participant?  The other question is asking do they share in an allocation? 

I think that since they were in, they're in and can't be excluded based on having gone to part-time, even if have less than 1,000 hours. As ESOP Guy points out, whether they get an allocation or not of contributions other than elective deferrals is a separate issue.

as pointed out, you can't exclude someone because they are 'part-time' (or classified as some other category which is simply a disguised 'part-time' definition.)

There is a chance the person might be excluded under the break in service rules (almost impossible if it is a 401k)

But, as pointed out in the ERISA Outline Book,

Chapter 2 Section V Part B 2(c)

Termination of employment not necessary in order to incur a break of serv8ice, and is followed by an example of a person with a reduced work schedule. If the plan uses the rule of parity then it is doubtful they would now be excludable. but if plan has a 1 year break in service rule then yes, they could end up being excludable

and then follows Part C 1a1 How to administer if break in service occurs while participant is still working...(e.g. if the person works 1000 hours again)

The first paragraph in WIFBR's follow-up is not dealing with allocation conditions; it is the fail-safe mechanism for ensuring that the service-based excluded class ends at the time prescribed by IRC 410(a), i.e., an employee forever ceases to be able to be a part-time employee (for purposes of the excluded class) once one year of service (for eligibility purposes, and using, presumably, the hours method) is credited.  (The plan might mandate the hours method in this situation.)  Thus, any employee who has a year of service will never (again) be able to be treated as part-time, regardless of their regularly scheduled hours.

This 410(a) fail-safe provision is a common provision in preapproved plans, though you may need to dig for it, and not all providers will use the same language (though you should get to the same place).  When the 410(a) fail-safe provision of one year of service is credited, you apply the plan's provisions for going from an ineligible class to an eligible class.  The employee in your example never was in the part-time excluded class, and never will be.

In other words, a service-based excluded classification is permissible only if you do not violate the 410(a)'s service requirement.  Most plans will use one year of service universally as the fail-safe provision, though, I suppose in some contexts, a plan could impose a two-year requirement (e.g., for profit sharing eligibility if there is full and immediate vesting).