Facts
Our 401(k) plan requires employees to work for us for six months before they become eligible to join. Pretty much all of our employees have been full time and have worked continuous, nine-to-five-type schedules.
Two years ago, however, we hired a college student on a part-time basis. He has worked summers and all of his college breaks. It seems like a lot of unnecessary work to terminate his employment at the end of each break and then rehire him the next time he is home. Instead, we maintain him in our records as an active employee; we just don’t schedule him to work while he is away at school.
Question
To determine whether or not he is eligible, do we consider the entire two-year period he has worked for us even though he has never worked for six months in a row?
Answer
As a general rule, all of an employee’s service is considered when determining eligibility for the 401(k) plan. One of the primary questions is whether or not your plan requires an employee to perform at least one hour of service in each of six consecutive months or if it applies what is called the elapsed time method.
In our experience, the elapsed time is far more common, so we will assume that is what your plan says. Applying it to this situation, if your college student was still employed six months after his initial date of hire, he or she satisfies the eligibility requirement as of that date and should have been permitted to join the plan accordingly.
For more information on plan eligibility and rehires, please visit our Knowledge Center here and here.
