A client noticed that in a volume submitter 401(K) plan document that the hours of service required for eligibility may be prorated for a short plan year. However, when the client looked at Sal Tripodi's ERISA Outline Book under the section about short plan years, they found that Sal contends that a plan may NOT prorate the number of hours eligibility requirement for a short plan year. Please help!!!!
Rev. 08-07-03

The default under the plan document is to not prorate. However, facts may arise where one may have to go beyond the norm. If an employee fails to complete the 1,000 hour requirement in his or her first employment year, many plans switch the eligibility computation period to the plan year during which the first employment year ends. If it so happens that the plan year during which the first employment year ends is a short plan year, it is possible (and some would say necessary) to prorate the hours in that short year to determine eligibility. With fewer and fewer plans requiring the full one year of service for eligibility, this becomes less of an issue.

Usually we would agree with Sal, however, an alternative that was approved by the IRS has been made available under the plan document. The client may, but is not required to, select this option.