Voluntary Service Crediting for Period of Lay-Off

I am starting to see questions from employers who laid employees off this year due to COVID and are planning to hire them back as to whether they can voluntarily grant accrual service for the period of the lay-off.  (Note:  The terminology seems to vary by employer and state, but I'm talking about a situation where there was actually a termination and rehire, not an unpaid leave where the individual remained employed.)  Even though the employers are trying to do a nice thing for these participants, granting service for a period of nonemployment strikes me as an exclusive benefit violation.  I have to imagine that others are seeing this question as well.  Thoughts?

Not all that uncommon, especially in hourly based plans.  You should check your current definition of service and make sure it isn't already counted.  Assuming it is not discriminatory, they could always amend the plan to include additional service credits from a fixed time period for certain group of employees.  Be careful about including/excluding participants who didn't return to work.  

Maybe something like, all participants who were actively employed on 1/1/2020 and also actively employed on 1/1/21 will be granted 1 year of credited service notwithstanding the actual hours worked during that period.  Probably need to defined "active", but you get the idea.

We have also seen sponsors wanting to boost benefits to make up for COVID related pay cuts.

Interesting.  I appreciate the reply.  I suppose I have seen plenty of plans that voluntarily credit prior service with a previous (non-controlled group) employer, and from an exclusive benefit standpoint, there would really be no difference.

15 hours ago, Effen said:

Be careful about including/excluding participants who didn't return to work. 

I'm curious exactly what you're cautioning against here...  Are you just pointing out that the language has to be carefully drafted to capture the intended individuals?  Or is there some inherent problem with including/excluding these folks?  For example, what if a plan sponsor laid a bunch of people off in March with the intention to rehire them, but only ends up rehiring some of them...  Any issue with granting each of the non-rehired individuals service through the date on which the decision is made not to rehire him or her (assuming no discrimination issues and that the plan sponsor could administer this)?  Does it then become an exclusive benefit issue if we're talking about someone who is not an employee at the time of they are granted the service?

In addition to Effen's comments, it may be prudent to specify service for all purposes.  Not just accrual service, but also specify the intent w/r/t participation service and vesting service.

Thanks David, I agree that--assuming that the granting of service is permissible--it should apply for all purposes, not just accrual.  I take it you agree with Effen that this would be permissible.  Any thoughts on granting the service for the folks who are never rehired?

Also, be careful if you are using pre-approved plan. You may or may not be able to reconcile this language with the allowable options in the document.

Sorry, I was primarily meaning that you need to craft your language carefully to avoid unintended consequences.  

1 minute ago, Effen said:

Sorry, I was primarily meaning that you need to craft your language carefully to avoid unintended consequences.  

Thanks!  So, no inherent problem with granting additional service to former participants who will not be rehired?