Eligibility & Probationary Period

Good morning!  I have a client that hires employees on a 3-month probationary period (though these employees are on payroll).  The current document states that an employee becomes eligible on the 1/1 or 7/1 after 1-year of service (1,000 hours).

The employer wants to have that 1 year start after the probationary period.  For example if someone was hired on 06/20, their probationary period runs from 06/20/21-09/20/21.  Can the 1-year wait then start from 09/20, meaning they don't become eligible until 01/01/23 (instead of 07/01/22 if the 1-year started from the original DOH, not the date the probationary period ends).

Is that allowed?

Thanks in advance!

No.  

I agree with shERPA, but they might be able to achieve the same, or mostly the same, result if they do it right.

You said these people are on payroll during their probationary period, presumably that means they are employees during that period. If that is the case then you absolutely cannot disregard their service during the probationary period when determining eligibility.

What you can do, if they are willing to open up to more than semi-annual entry dates, is rely on the actual maximum entry conditions under 410(a), which says that you have to become a participant no later than the earlier of the 1st day of the plan year or 6 months following the date that you meet 1 year of service and age 21. For example, they could write their plan document to say that you enter the plan on the first day of the month coincident with or next following the 1 year anniversary of the end of your probation period, or the beginning of the next plan year, if sooner. An employee hired in June 2020 would complete their probationary period in September 2020 and enter the plan October 1, 2021. That is fine, because it is less than 6 months from the day they actually completed 1 year of service, which was June 2021. However if you have someone who is hired late in the year it doesn't work right. Say you have an employee hired in November 2020, they complete their probationary period in February 2021, so you would want them to enter March 1, 2022, but they have to enter on January 1, 2022 instead, because it's the first day of the plan year.

If the plan is not a 401(k), I believe you can have up to a two year wait, if you vest 100% on entry.  I could be wrong.. that's why I retired 😆

37 minutes ago, imchipbrown said:

If the plan is not a 401(k), I believe you can have up to a two year wait, if you vest 100% on entry.  I could be wrong.. that's why I retired 😆

 

If the plan is not a 401K plan then the post is in the wrong forum.