New 401(k) Plan and Eligibility

A new 401(k) plan with a January 1, 2020 effective date. The plan requires age 21 and a year of service (1000 hrs in 12  mo) for participation, with semi-annual (Jan & Jul) entry dates. As we establish which employees will enter the plan on the effective date, we have noticed there are several rehires during 2019, who had previously worked for the plan sponsor. So, how do we determine initial eligibility for people such as JOE and SUE, below?

JOE previously worked (fulltime) for the plan sponsor from January 1, 2015 until December 31, 2018. JOE was rehired (fulltime) July 1, 2019 and worked 1,000 hours during 2019.

SUE previously worked (fulltime) for the plan sponsor from January 1, 2015 until April 15, 2019. SUE was rehired October 15, 2019 and worked 1,000 hours (combined) during 2019.

And what other factors related to "eligibility and past service" should we consider, if any? (By the way, determining years of service for vesting appears much simpler. Or, at least, it does with the plan document in use for this plan.)

Eligibility computation period begins the date employee first performs an Hour of Service, regardless of the effective date of the Plan, so by 12/31/2015 both Joe and Sue completed a year of eligibility service. Did they lose that service due to break in service rules? Clearly not. Were they employed on their first entry date following completion of eligibility requirements? Yes, both employed on 1/1/2020. Plan provisions should be fairly clear on this as well as vesting.

What if plan started 3/1/20 and  entry dates are 1/1 and 7/1.  Do you have to provide for a special participation date in order to participate on 3/1/20 or must they wait until 7/1/20

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2 hours ago, Susan P - CPA said:

What if plan started 3/1/20 and  entry dates are 1/1 and 7/1.  Do you have to provide for a special participation date in order to participate on 3/1/20 or must they wait until 7/1/20

 

Depends on plan provisions.