How does the statutory eligibility rule (one year and 1,000 hours of service) apply when an employee works 1,000 hours, leaves before completing 12 months of service, and is then rehired?
Rev. 09/12/07, E-mail Alert 2007-12

The answer depends directly on when the individual is rehired.
The following fact set and examples will clarify the rules.

Plan design fact set for the examples:
Calendar year 401(k) plan
Plan eligibility: 1 year & 1,000 hours
Plan entry date: monthly
This plan counts all employee service.

• Employee date of hire (DOH): March 26, 2008
• Employee date of termination (DOT): October 26, 2008, with 1,200 hours of service
• Employee date of rehire (DOR): January 22, 2009

Since the employee completed the 1,000 hours of service and was employed at the end of the measuring period on March 25, 2009, the employee would enter on the plan's next entry date, April 1, 2009.

Example 2

• Employee DOH: March 26, 2008
• Employee DOT: October. 26, 2008, with 1,200 hours of service
• Employee DOR: July 9, 2009

The employee completed the 1,000-hour requirement and upon rehire had not yet incurred a break-in-service. Therefore, the employee is treated as though he or she had never left. Since the employee's rehire date is after his or her original entry date of April 1, 2007, the employee would become a participant as of his or her rehire date. The employee could start deferring on the date of rehire or as soon as administratively feasible thereafter. Employer contributions would also be based on the rehire date of July 9.