Data Changes : Enrolling a Participant
Who’s Eligible to Enroll
To be eligible for the plan, an eligible attorney or staff member must meet the age and service conditions (if any) specified in your plan’s adoption agreement. Check your adoption agreement for your plan’s specific provisions. By law, you cannot require the person to be older than age 21 or to complete more than two years of eligibility service. If your profit sharing plan has a 401(k) feature, you cannot require more than one year of service to participate in the 401(k) feature. An attorney or staff member may immediately set up a rollover account for contributions from a prior plan or IRA even if he or she has not met your plan’s eligibility conditions. However, he or she will not be considered a “participant” for any other purpose until the eligibility criteria are met. (Have the employee enroll online to have an account established for purposes of making a rollover contribution, but no other contributions may be made on behalf of such member until the eligibility conditions have been satisfied.) Note: for a plan converting to the Program, all participants with assets being transferred must be enrolled, including terminated employees, beneficiaries maintaining an account and alternate payees maintaining an account.
The covered group is the group of employees who are eligible to be covered by the plan. For instance, if a plan excluded union employees but all other employees were in the “covered group,” and an employee transitioned to being a non-union employee, he or she would also transition to the covered group.
Joining the Plan
An attorney or staff member is eligible to join the plan on the first entry date after meeting the eligibility conditions of your plan (refer to your adoption agreement for the entry dates you have selected for your plan). If the plan has an automatic enrollment design feature, contributions will automatically begin for an eligible attorney or staff member at the level provided in the firm’s adoption agreement, unless the individual affirmatively elects a different contribution level, or affirmatively elects to make no contributions to the plan.
If an individual has a break in service prior to satisfying the eligibility conditions, such individual’s prior service shall be counted in determining when he or she is eligible to become a participant, provided, however, that if he or she is subject to a vesting schedule that is at least as favorable as Schedule A in the adoption agreement, such prior service will not be taken into account.
If an individual has a break in service after satisfying the eligibility conditions and after becoming a participant, such individual shall become a participant immediately following the date of his or her reemployment.
If the individual has transferred from an excluded employee group to a covered group, he or she will receive credit for service completed with the firm while in the noncovered group and will become a participant upon the first entry date coincident with or next following the transfer if all eligibility conditions are satisfied at that time. Otherwise, the individual will become a participant on the first entry date coincident with or next following the date after the transfer that all eligibility conditions are satisfied.
There are two methods of determining eligibility. Your firm is subject to the method chosen in your adoption agreement.
Hours of Service Method
If the service eligibility condition under your plan is determined by reference to a certain number of “years of eligibility service” as elected by you in your adoption agreement for any component of your plan, this is known as the hours of service method of calculating eligibility. An attorney or staff member earns one year of eligibility service for the 12-consecutive month period beginning on his or her hire date and ending on the first anniversary date of employment during which he or she is credited with 1,000 hours of service. Subsequent eligibility computation periods generally begin on the anniversary of the employee’s hire date unless you have elected in the adoption agreement to use the subsequent plan year option, in which case, the 12-consecutive month period begins on the first day of the first plan year which begins prior to the employee’s first anniversary date.
Elapsed Time Method
If the service eligibility condition under your plan is determined by reference to a certain number of “months of service” as elected by you in your adoption agreement as the eligibility period (including 12 months), this is known as the elapsed time method of calculating eligibility. Choosing 12 months of service as the eligibility condition differs from choosing one year of eligibility service because, in the case of the elapsed time method, an employee is credited with service if he or she is employed the required period of service, regardless of the number of hours worked during such period. Also, under the elapsed time method, if an employee terminates before becoming eligible and is rehired within 12 months, the period of absence from employment counts as service
Hours of Service
Participants earn an hour of service for each hour they are entitled to receive pay. This count includes vacation, holiday, sickness, disability, layoff, jury or military duty, or paid leave of absence. Hours paid solely for the purpose of complying with workers’ compensation or disability insurance laws are not included. No more than 501 hours of service can be credited for any continuous period during which duties are not performed. For example, if a participant is on a paid leave of absence lasting 800 continuous hours, he or she would only receive credit for 501 hours due to this absence. Your adoption agreement also has more information on how hours of service are credited.
Breaks in Service/Period of Severance
For plans that use the hours of service method of calculating eligibility, a break in service occurs for each 12-month period during which a participant has not completed more than 500 hours of service. The 12- month period starts on his or her hire date and ends on each anniversary of that date. After the initial 12-month period, if elected in the adoption agreement, subsequent 12-month periods refer to the plan year
For purposes of determining if a break in service has occurred, the participant will receive credit of up to 501 hours of service for an absence due to pregnancy, birth, adoption or care of a child following placement for adoption.
For plans that use the elapsed time method of calculating eligibility, a period of severance is any period of absence from employment more than 12 months long.
An employee receives vesting service for his or her completed years and calendar months of employment, including periods as a partner or sole proprietor of the firm. Fractional months are computed in days, with 30 days equaling one month. Vesting service is credited during periods of absence lasting less than 12 months, during disability (as defined in the Plan) or military service (provided that the employee returns to employment with your firm within the period prescribed by laws regarding reemployment rights of individuals in military service), and for the first 12 months of absence for any reason other than the employee’s quitting, retiring or being discharged.
An attorney’s or staff member’s entry date will be one of the following, as selected in the plan’s adoption agreement:
- The first day coincident with satisfaction of the eligibility conditions,
- The first day of the first or seventh month of the plan year coincident with or next following satisfaction of the eligibility conditions (i.e., January 1 or July 1 for calendar year plans),
- The first day of the plan year quarter coincident with or next following satisfaction of the eligibility conditions are met (i.e., January 1, April 1, July 1 or October 1 for calendar year plans), or
- The first day of the month coincident with or next following satisfaction of the eligibility conditions..
When assisting the employee with the online enrollment process, you will need to provide the following:
- Six-digit Program number for your plan,
- Date of hire, and
- Entry date into the plan.
Provide an Enrollment Package for New Participant
You need to provide employees with an Enrollment Package for New Participant once they become eligible. The package includes helpful information on saving for retirement as well as information concerning the Program’s investment options, enrollment and beneficiary forms and the Participant Disclosures required by the Department of Labor (DOL). In the interest of “going green,” the enrollment kit is available online (see the link above). The only item that needs to be printed is the Beneficiary Designation Form if the participant is naming someone other than a spouse as the sole primary beneficiary and, if the participant wishes to roll assets into the plan, a Rollover Certification Form.
You may be required to provide participants with additional materials, depending on your plan design. The following chart outlines the additional materials that may be required and the timeframes for providing them.
|The plan has been amended to use a Qualified Default Investment Alternative (QDIA) as the default fund||The enrollment kit must include the QDIA notice||At least 30 days before eligibility or the first investment for the participant|
(The notice may be provided as late as the day of plan eligibility if the plan includes the “unwind” feature. See below.)
|The plan has been amended to use the Qualified Automatic Contribution Arrangement (QACA – the new safe harbor automatic enrollment), or the Eligible Automatic Contribution Arrangement (EACA)||Notices must be provided (the enrollment kit must include such notice if applicable)||As required by IRS Regulations, no later than 30 but no earlier than 90 days before the beginning of the plan year (or, in the case of an employee who becomes a participant during the plan year, by the day on which such employee becomes a participant, but not more than 90 days prior). (In the case of an EACA, the QDIA notice must also be included.)|
|The employer intends to use the “unwind” (opt out) feature available under QACA and EACA||A form must be provided to let the employee elect to “unwind” an automatic contribution||If the employee wants to unwind the automatic contribution, he or she must do so within 90 days after the first automatic contribution|
|Applicable to all plan designs|
The enrollment kit must include the plan and investment related Participant Disclosures (Disclosure of Plan-Related Information).
|As required by the Department of Labor (DOL), the Participant Disclosures must be provided by the Plan Administrator to eligible employees on or before they can first direct their investments, and then annually thereafter.|
If this is a new plan, you will receive a summary plan description (SPD) from the Program after you complete, sign and submit the adoption agreement to the Program. The SPD is a legal document that summarizes your plan’s provisions and must be given to all plan participants, beneficiaries and alternate payees. If this is an existing plan, you should provide the SPD when you forward the enrollment kit to eligible employees.