Hours or Years?

Sponsored by: MFS Investment Management

A question came up recently on a committee call about how plan sponsors calculate time for eligibility and vesting requirements – are they tracking hours, or using elapsed time (6 months, 1 year, etc.). One plan sponsor stated they had recently changed from calculating hours worked to elapsed time for ease of administration. This is not something we have ever asked about before so its too early to tell if there is a trend, but we did ask members last week how they calculate service for eligibility and vesting. A handful use both methods (6 percent) with nearly half (48 percent) using elapsed time and 44 percent used tracking hours worked. Comments follow.

Use both:

• Elapsed time for Full Time and a combination of hours worked and elapsed time for Part Time.
• Elapsed time for initial eligibility and period/hours worked for vesting.
• Elapsed time for Salaried and Hours worked for unionized workers.
• Hours and elapsed time required to receive employer match.
• We use elapsed time for vesting and hours worked for those employees not actively working full- or part-time.
• Both: 1000 hours worked and 1 year of tenure
   

Elapsed time:

• 1st of month following 30 days of employment
• 1st of the month following 3 months of service
• 6 months of service for eligibility.  Immediate for vesting because our plan is a safe harbor plan.
• Also, we can bridge service for vesting.  For example, if someone is part of a lay off a couple days or weeks before a significant vesting date (partial or full vesting.  It's the right thing to do when but for the layoff, they would have met the vesting schedule date.
• Date of Hire for Eligibility, 3 Year Cliff for Vesting.
• For us, eligibility is determined by length of service. Employees can join the plan on their one-year anniversary. However, because we have a safe-harbor plan, vesting is immediate once they join.
• Hours worked was too hard to determine. Elapsed time much easier. We added part-timers to our plan several years ago which also helped.
• No hours requirement.  All employees are eligible to defer on first of month following one month.  Safe Harbor match eligibility is first of month following 6 months.  Participants are 100% vested.
• Our plan is always 100% vested and eligibility is met after 90 days of service.
• We do not track hours.
• We have a ton of rehires.  Every week we spend countless hours re-calculating vesting dates and evaluating breaks in service.
• We hold off on employer contributions for 1 full year, and we vest those contributions at 20% per full year for 5 years.  I feel it's outdated and a dis-service to employees who need this benefit to have a stronger financial base sooner.  Perhaps we talk a good talk about alleviating financial stress, but then we hold off on doing the things that alleviate financial stress using out-date models of work and benefits.
   

Hours worked:

• 1,000 hours of plan service in a calendar year to earn a year of vesting. Three years of service to vest.
• 1000 hours in plan year
• 1000 hrs per year
• For our match, we have immediate vesting, but for the employer contribution we have a vesting schedule.
• Must work 1,000 consecutive hours & be employed on the last day of the plan year to be eligible for profit sharing and/or match contributions.
• State statute defines a year of service.
• We have two plans. 401(a) plan - Hours worked for eligibility. 1000 hours by anniversary date for entry, 1000 in the calendar year to remain eligible for contribution. Immediate vesting. 403(b) plan - no eligibility criteria, immediate vesting
• We use hours worked for vesting, but we have immediate eligibility for deferrals and match.
• All participants are eligible for salary deferrals from date of hire and are always 100% vested. Participants must work 12 months and 1000 hours to qualify for the non-elective employer contribution in the Plan.