Two year entry

I am having a hard time finding rules on the two year of service eligibility requirement.   I thought you could not have dual entry dates because someone could actually be excluded from the plan for more than two years.    

Example:  Joe is hired 7/15/2018.  He meets eligibility 7/15/2020.  Does he enter the plan on 1/1/2021 or can there only be one entry date for the beginning of the plan year.   

Am I confusing rules with 1 year of service and more than 18 months?

You can require 2 years of service if all contributions will be 100% vested. The 2 year of service rule is not available for 401(k) deferrals.

You can still use semiannual entry dates with the 2 year of service rule. The way 410(a) is written, it says that if the plan provides 100% vesting then you can just replace "1 year of service" with "2 years of service" and nothing else changes. As long as the employee becomes a participant no later than the earlier of the first day of the next plan year or 6 months after completing 2 years of service, then they meet the requirements.

Be careful with how you define your eligibility computation period when using this rule. The initial period always starts on the employee's date of hire, but the default in many plans is to have it switch to the plan year after the first period. If you do it that way the second period could begin while the first period is still ongoing. For example, if you have somebody whose date of hire is April 1, 2021, they would complete their first year of service on March 31, 2022. If the eligibility computation period switches to the plan year, then the second period begins on January 1, 2022 (assuming the plan year is the calendar year) and they would complete a second year of eligibility service on December 31, 022 and enter the plan on January 1, 2023. If the intention is for them to become eligible no earlier than their 2nd anniversary of hire, then you have to make sure that the eligibility computation period remains on the anniversary year and does not switch to the plan year.

Thank you!