RPF M2 U1 Eligibility

Question 1

What must Yolanda decide regarding her 401(k) plan?

Answer 1

Yolanda must decide when her employees will be eligible for the 401(k) plan, how to provide new participants with plan information, what types of contributions they may make, whether she will make contributions on their behalf, and how to keep track of all the information associated with plan administration.

Question 2

What is the eligibility requirement Yolanda set for her employees?

Answer 2

Yolanda set a requirement that employees must work for three months before becoming eligible for the plan.

Question 3

What are the two methods for determining eligibility?

Answer 3

The two methods for determining eligibility are Counting Hours of Service and Elapsed Time.

Question 4

What is the ‘Counting Hours of Service’ method?

Answer 4

A method of determining eligibility that measures the amount of service an employee has completed by calculating the number of hours counted in a period of time.

Question 5

What is the ‘Elapsed Time’ method?

Answer 5

A method of determining eligibility that measures the amount of service an employee has completed by tracking the period of employment that has elapsed since the employee’s date of hire.

Question 6

What is the ‘Eligibility Computation Period’?

Answer 6

A defined beginning date and ending date for determining eligibility.

Question 7

What is the ‘Employment Commencement Date’?

Answer 7

The first day an employee receives credit for one hour of service; used to mark the start of the eligibility computation period.

Question 8

Who is considered a ‘Long-Term, Part-Time Employee’?

Answer 8

An employee who is credited with 500 hours of service or more for two consecutive years.

Question 9

What does ‘Period of Service’ refer to?

Answer 9

The amount of time credited to an employee for their service to the employer that determines their eligibility for the plan.

Question 10

What is the statutory age requirement for eligibility?

Answer 10

Plans may not require an employee to reach an age older than 21 as a condition of becoming a participant.

Question 11

What is the maximum service requirement for eligibility?

Answer 11

A plan may not require more than one year of service as a condition of becoming a participant in the plan.

Question 12

What are ‘statutorily excludable’ employees?

Answer 12

Employees such as independent contractors, union employees, and nonresident aliens who may be excluded from a plan.

Question 13

Are independent contractors eligible for qualified plans?

Answer 13

Generally, independent contractors are not eligible to participate in almost all qualified plans, except for government 457(b) plans.

Question 14

What is the rule regarding union employees?

Answer 14

The law allows a plan to exclude union employees who have retirement benefits outside the plan that were subject to good-faith collective bargaining.

Question 15

What is the eligibility tracking responsibility of the employer?

Answer 15

The employer is responsible for determining when an employee has met the eligibility requirements and for providing the employee with an opportunity to contribute.

Question 16

What information must be provided to track eligibility?

Answer 16

Information such as each employee’s date of birth (DOB), date of hire (DOH), and number of hours worked.

Question 17

How is an employee’s eligibility date calculated?

Answer 17

To determine when the employee meets the age requirement, add the age requirement to the employee’s DOB.

Question 18

What is a year of service?

Answer 18

A year of service is defined by either the elapsed time or counting hours of service method.

Question 19

What is the ‘service-spanning rule’?

Answer 19

This rule makes the elapsed time method ineffective in excluding seasonal employees by treating absences of less than 12 months as if the employee was employed during that absence.

Question 20

What is the counting hours of service method?

Answer 20

A method that calculates hours worked using eligibility computation periods, requiring at least 1,000 hours of service for a year of service.

Question 21

What is the eligibility computation period requirement?

Answer 21

The eligibility computation period must be a period of 12 consecutive months, but the plan may not require continuous employment throughout the 12-month period.

Question 22

What happens if the plan defines the subsequent periods as the plan year?

Answer 22

The second eligibility computation period begins with the first plan year that begins after the date of hire.

Question 23

When will Glenda meet the one year of service eligibility requirement?

Answer 23

Glenda will meet the requirement on November 30, 2024, after completing the eligibility computation period.

Question 24

What defines the second eligibility computation period if the plan uses the plan year?

Answer 24

The second eligibility computation period begins with the first plan year after the date of hire.

Question 25

What happens during the overlap of eligibility computation periods?

Answer 25

Hours of service credited during the overlap count for both periods.

Question 26

What is an example of overlapping eligibility computation periods?

Answer 26

Wayne's second computation period overlaps with his first from January 1, 2024, to August 7, 2024. ## Footnote Wayne's first period is from August 8, 2023, to August 7, 2024, and the second is from January 1, 2024, to December 31, 2024.

Question 27

How do anniversary periods differ from plan year periods?

Answer 27

Anniversary periods begin on the anniversary of the employee's date of hire and do not overlap with the initial computation period.

Question 28

What is an example of eligibility computation periods defined as anniversary periods?

Answer 28

Wayne's second eligibility computation period would begin on August 8, 2024, and end on August 7, 2025, with no overlap. ## Footnote The first period ends on August 7, 2024.

Question 29

How is a year of service credited?

Answer 29

A year of service is credited at the end of the eligibility computation period in which it is earned.

Question 30

What constitutes an hour of service?

Answer 30

An hour of service is any hour for which an employee is paid or entitled to payment, including actual hours worked and paid leave.

Question 31

What is the equivalency method for tracking hours?

Answer 31

The equivalency method approximates hours worked, such as crediting 45 hours for each week of employment regardless of actual hours worked.

Question 32

Can a plan have different eligibility requirements for different employee groups?

Answer 32

Yes, a plan can specify different eligibility requirements for different job classifications or parts of the plan.

Question 33

What are the statutory requirements for eligibility in a 401(k) plan?

Answer 33

Plans cannot exceed the requirements of 21 years of age and one year of service for eligibility purposes.

Question 34

What options does an employer have to set eligibility requirements?

Answer 34

Employers can require a certain age and/or period of service, and may exclude certain classes of employees. ## Footnote Some plans may require up to two years of service for immediate vesting.

Question 35

How does an employer determine when an employee becomes eligible?

Answer 35

Employers track data like date of birth, date of hire, and hours worked to determine eligibility.

Question 36

What is the process to determine eligibility based on age and service requirements?

Answer 36

Add the age requirement to the birth date and the service requirement to the date of hire, then compare the two dates.