1,000 hours when gap between end of payroll period and payment date straddles two tax years

Employer's payroll period ended 12/28/19 but payment not made until 1/5/20 in accordance with regular payroll procedures.  Employee hits 1,000 hours during payroll period ending 12/28/19.  Does the employer have to credit the time in 2019 or, because it was not paid until 2020, can employer treat the hours for pay period ending on 12/28 as performed in 2020 based on the payment date.  Reg. 2530.200b-2(c)(4) and Example 5 do not technically apply since the payroll period does not straddle the tax years; instead it is the gap between end of the payroll period and payment date that straddles the tax years.  Is there any basis for extending the concept to the situation described?  Thank you.

Check your document.  It will define hours.  It will most likely define hours as hours for work paid.  To me that means it follows compensation.  Otherwise you would have the hours in 2019 and the comp in 2020.   That makes no sense.  Unless you have one of those documents allows the comp to be "pulled back" into the year earned.

This is most likely a document question not a law question.  

Given how almost all my documents read I would never take the position this person has 1,000 hours. 

Document tracks 2530.200b-(a)(1).  2530.200b-(c)(1) states that hours are credited to the computation period in which the services are performed, except as provided in (c)(4), which is the situation where payroll period straddles two tax years.   This suggests 2019 but obviously want to go with 2020 so I appreciate your response.  Any others?

On 3/13/2020 at 6:50 PM, Car23 said:

Document tracks 2530.200b-(a)(1).  2530.200b-(c)(1) states that hours are credited to the computation period in which the services are performed, except as provided in (c)(4), which is the situation where payroll period straddles two tax years.   This suggests 2019 but obviously want to go with 2020 so I appreciate your response.  Any others?

If you really want an answer, post the actual language from the plan. These things are VERY sensitive to the actual language, and just saying "it tracks" something is not enough to parse the actual language as written. 

1 hour ago, Larry Starr said:

If you really want an answer, post the actual language from the plan. These things are VERY sensitive to the actual language, and just saying "it tracks" something is not enough to parse the actual language as written. 

1 hour ago, Larry Starr said:

If you really want an answer, post the actual language from the plan. These things are VERY sensitive to the actual language, and just saying "it tracks" something is not enough to parse the actual language as written. 

The actual plan language is in italics: 

"Each hour for which he is paid, or entitled to payment, for the performance of duties for the Employer during the applicable period …"  (This tracks 2530.200b-2(a)(1).  The plan follows the rest of -2(a) as well but this is not relevant to the question.)

"The rules set forth in (b) and (c) of Department of Labor Regulations Section 2530.200b-2, which relate to determining Hours of Service attributable to reasons other than the performance of duties and crediting Hours of Service to particular periods, are hereby incorporated by reference."  (Emphasis added.) (This tracks the requirements of 200b-2(f).)

 The requirements for vesting are "completion of 1,000 Hours of Service in the computation period", and for the profit-sharing contribution are "completion of 1,000 Hours of Service in the Plan Year."

I am looking at 200b-2(c)(1), (4) and Example 5 and looking for thoughts on whether it can be interpreted to cover a situation where all the duties are performed before the end of the Plan Year but paid after year end in accordance with regular payroll procedures.

As I expected, I have no doubt that the hours you count ("every hour for which you are paid OR ENTITLED TO PAYMENT...") means that the hours worked during the year (even if some of the pay for the last period is in the next year) COUNTS for that first plan year.  I assume the computation period is also plan year, so the same would hold for vesting.  So in your example, the hours worked in 2019 will count for 2019; W-2 might not include some of the hours from that year but probably will include payment for some of the hours form 2018 if the same situation applied for that year.

I am surprised by this discussion. I had always assumed that, barring document language clearly to the contrary that I have never seen, payment date is irrelevant. If payment date is dispositive, I wonder about deferred income arrangements.