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Dear Kim:

I think that whoever is informing you about the Plan operation is a little confused. A plan under IRC 411 can measure service for vesting service in one of two ways: by Year of Service (with a maximum requirement of 1000 Hours of Service in the measurement period), or by Elapsed Time method. I looked into RIA's Checkpoint for the following on Years of Service:

A plan's vesting schedule is based on a participant's completion of “years of service” with the employer or employers maintaining the plan. A “year of service” for vesting purposes means a calendar year, plan year, or other 12-consecutive month period designated by the plan (and not prohibited by Labor Department regs) during which the participant has completed 1,000 hours of service. Years of service are determined under rules prescribed by Labor Department regs for the vesting computation periods permitted).

A plan may not condition the granting of a year of service on the employee being present at work on the last day of the twelve-month period or any other day within the period. 30
30 Labor Reg. 2530.200b-1(b)

This last paragraph is key: your employer CANNOT require that you be employed on January 1 and December 31 in a year; only thing that matters is that you completed 1000 Hours of Service in the year.

Conversely, if an employer measures on "elapsed time" basis, the period starts on your hire date; there can be NO hours of service requirement. So if you work 1 Hour a month for 12 months and are still employed at your hire anniversary date, you get credit for a Year for vesting purposes.

Hope this is of help. (BTW, I am an Enrolled Actuary, have a little knowledge on these matters).

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