1300 Hours for PS Contribution

I'm preparing GUST, EGTRRA and PPA restatements for an employer who is under IRS audit.  The employer has been applying a 1300 hours requirement for a participant to receive the annual profit sharing contribution.  Obviously, that is not an option in the non-standardized document I am using.  The employer has asked me for a citation as to when 1,000 became the maximum number of hours permitted. 

Is it an IRS rule? Part of ERISA? I haven't been able to find something in writing to give to the employer.  I don't think it will be sufficient to say the document doesn't permit it.  

Thank you.

Consider this rule and the several statutes' sections and other rules this cites:

https://www.ecfr.gov/cgi-bin/text-idx?SID=55842d869c1e469dad9d00e37cea9aff&mc=true&node=se29.9.2530_1200b_61&rgn=div8

Consider also whether imposing as allocation conditions not only 1,000 hours in the year but also a last-day condition might help accomplish some of what the sponsor seeks.

But also test it for coverage and non-discrimination.

I have been doing this stuff since 1985.  I do not recall it not being 1,000 hours for computation periods, since my start in the field.  You might want to look at each year to see how that extra 300 hours impacted operations.  If there was an impact, you need to look at correction methods.

38 minutes ago, Below Ground said:

I have been doing this stuff since 1985.  I do not recall it not being 1,000 hours for computation periods, since my start in the field. 

I think the DOL Regs Peter linked above date back to 1976...

I looked into this last week as I was curious.....  I don't have a specific answer, but I bet someone does.

My research was the EOB 2013 Edition.  Section 3A.142  Accruing Benefits    This section was bolded in the EOB, it was pointed out by Fid Gui Con above....  "[A] plan which is not a defined benefit plan.... may provide that an individual who has been a participant  in the plan, but who has separated from service before the date on which the employer's contributions to the plan or forfeitures are allocated among participant's accounts... does not share in the allocation of such contributions or forfeitures even though the individual is credited with 1,000 or more hours of service...."

The very next item in the section is

"1.  Hours of service condition.  A common accrual requirement in a defined contribution plan is that the participant must satisfy a minimum hours of service requirement for the plan year.  This minimum requirement may not exceed 1000 hours. "

How Sal connected the 2530.200b reg to 1000 hours, I do not know.  I'm certainly not saying Sal is wrong, just that he connects the reg with 1000 hours.

I'm sure someone can opine on the connection!

The cited rule was published in 1976.  The Revenue Ruling cited in the rule was released June 11, 1976.

Strictly speaking, the rule's text about 1,000 hours in a computation period refers to a year of service, for eligibility or vesting, or a year of participation for an accrual.

The cited rule does not directly constrain a profit-sharing plan's allocation condition.

But in the inquirer's circumstances, which include an IRS examination, it might be unwise to push the 1,300-hours point, especially if the employer/sponsor might accomplish much of its business purpose using a combination of a 1,000-hours condition and a last-day condition.

the DOL cite clearly says even if the employee has 1000 hours he could be excluded from sharing in the allocation. I think the inference is if active and 1000 hours then you have to include (otherwise I guess if you only worked 1200 each year you should always quit, be eligible and the come back to work!)