(b)lines Ask the Experts – Eligibility After Move From Union to Non-Union Employee

“We sponsor an Employee Retirement Income Security Act (ERISA) 403(b) plan that excludes collectively bargained employees from the right to receive employer contributions, though they are permitted to make elective deferrals to the plan.

“Recently, a union employee who has been a full-time employee for 10 years transferred to a nonunion position which is eligible to receive employer contributions in the 403(b) plan. However, we have a waiting period of one year in order to receive employer contributions, and employer contributions are not fully vested until after the completion of three years of services. Does my former collectively-bargained employee need to wait a year in order to receive employer contributions, and three years to become fully vested? Or is he immediately eligible/vested, since he has already completed 10 years of service, albeit as a union employee?” 

Michael A. Webb, vice president, Cammack Retirement Group, answers:  

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Proper crediting of service can often be an area of confusion for plan sponsors, and your question is a prime example of the complexity of such rules.

There are types of service that can indeed be excluded under the Code for eligibility and/or vesting purposes (Code Section 411(a)(4), which excludes service prior to age 18 among other exclusions for vesting purposes, comes to mind). However, service while working in a classification that is excluded from the plan is NOT a type of service that can be excluded—at least for eligibility for participation and vesting.

Thus, in your example, an employee with 10 years of service as a collective bargained employee would be immediately eligible to receive employer contributions when he becomes a nonunion eligible employee, and would be immediately vested in such contributions as well.

Thank you for your question!

 

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.  

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to rmoore@strategic-i.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future Ask the Experts column.
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TRIVIAL PURSUITS: Why do frogs croak?

Why do frogs croak?

Frogs produce noise by inflating their vocal sacs with air and then forcing the air out through their mouths and noses. Each frog species has a characteristic call that differs from those of all other species.

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Frogs croak to attract mates, defend territories, dissuade predators and identify themselves. The most common calls are those used to defend territory and attract mates during the breeding season. While male frogs are much more vocal than females, the females of some species are capable of producing sounds as well.

In addition to croaks, frogs emit loud screams, called alarm calls, when they are grasped by a predator. These calls may startle the attacking predator, allowing the frog to escape.

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