(a) Initial eligibility computation period. For purposes of section
202(a)(1)(A)(ii) of the Act and section 410(a)(1)(A)(ii) of the Code,
the initial eligibility computation period the plan must use is the 12-
consecutive-month period beginning on the employment commencement date.
An employee's employment commencement date is the first day for which
the employee is entitled to be credited with an hour of service
described in Sec. 2530.200b-2(a)(1) for an employer maintaining the
plan. (For establishment of a reemployment commencement date following a
break in service, see Sec. 2530.200b-4(b)(1)(iii) and (iv).)
(b) Eligibility computation periods after the initial eligibility
computation period. In measuring years of service for purposes of
eligibility to participate after the initial eligibility computation
period, a plan may adopt either of the following alternatives:
(1) A plan may designate 12-consecutive-month periods beginning on
the first anniversary of an employee's employment commencement date and
succeeding anniversaries thereof as the eligibility computation period
after the initial eligibility computation period; or
(2) A plan may designate plan years beginning with the plan year
which includes the first anniversary of an employee's employment
commencement date as the eligibility computation period after the
initial eligibility computation period (without regard to whether the
employee is entitled to be credited with 1,000 hours of service during
such period), provided that an employee who is credited with 1,000 hours
of service in both the initial eligibility computation period and the
plan year which includes the first anniversary of the employee's
employment commencement date is credited with two years of service for
purposes of eligibility to participate.
(c) Service prior to a break in service. For purposes of applying
section 202(b)(4) of the Act and section 410(a)(5)(D) of the Code
(relating to years of service completed prior to a break in service for
purposes of eligibility to participate), the computation periods used by
a plan in determining years of service before such break shall be the
eligibility computation periods
established in accordance with paragraphs (a) and (b) of this section.
(d) Plans with 3-year 100 percent vesting. A plan which, under
202(a)(1)(B)(i) of the Act and section 410a(1)(B)(i) of the Code,
requires more than one year of service for eligibility to participate in
the plan shall use an initial eligibility computation period established
under paragraph (a) of this section and eligibility computation periods
designated in accordance with paragraph (b) of this section. Thus, for
the eligibility computation period after the initial eligibility
computation period, such a plan may designate either eligibility
computation periods beginning on anniversaries of an employee's
employment commencement date or plan years beginning with the plan year
which includes the anniversary of the first day of the initial
eligibility computation period.
(e) Alternative eligibility computation period. The following rule
is designed primarily for a plan using a rec-ordkeeping system which
does not permit the plan to identify an employee's employment
commencement date (or, in the case of an employee who has incurred a
one-year break in service, the employee's reemployment commencement
date), but which does permit the plan to identify a period of no more
than 31 days during which the employee's employment commencement date
(or reemployment commencement date) occurred.
(1) A plan may use an initial eligibility computation period (or
initial computation period for measuring completion of a year of service
upon an employee's return after a one-year break in service) beginning
on the first day of a period of no more than 31 days during which an
employee's employment commencement date (or reemployment commencement
date) occurs and ending on the anniversary of the last day of such
period.
(2) If a plan uses an initial eligibility computation period (or
initial computation period for measuring completion of a year of service
upon an employee's return after a one-year break in service) permitted
under paragraph (e)(1) of this section, the plan shall use the following
computation periods after the initial computation period:
(i) If the plan does not use plan years for computation periods
after the initial computation period, the plan shall use computation
periods beginning on anniversaries of the first day of the initial
computation period and ending on anniversaries of the last day of the
initial computation period, and including a period of at least 12
consecutive months.
(ii) If the plan uses plan years for computation periods after the
initial computation period, the plan shall use plan years beginning with
the plan year which includes the anniversary of the first day of the
initial computation period.
(3) For purposes of determining an employee's commencement of
participation under section 202(a)(4) of the Act and section 410(a)(4)
of the Code, regardless of whether an eligibility computation period
permitted under this paragraph includes a period longer than 12
consecutive months, an employee who completes 1,000 hours of service in
such eligibility computation period shall be treated as having satisfied
the plan's service requirement for eligibility to participate as of the
last day of the 12-consecutive-month period beginning on the first day
of such eligibility computation period. In the case of a plan described
in section 202(a)(1)(B)(i) of the Act and section 410(a)(1)(B)(i) of the
Code, the requirement of the preceding sentence shall apply only with
respect to the last year of service required under the plan for
eligibility to participate.
(4) Example. A plan maintained by Employer X obtains records from X
which indicate the number of hours worked by an employee during a
monthly payroll period. The records do not, however, break down the
number of hours worked by an employee by days. Thus, after a new
employee has begun employment with X it is impossible for the plan to
ascertain the employee's employment commencement date from the records
furnished by X (although it is possible for the plan to determine the
month during which an employee's employment commencement date occurred).
For administrative convenience, in conjunction with the equivalency
based on hours worked permitted under Sec. 2530.200b-3(d)(1), and
with the method of crediting hours of service to computation periods set
forth in Sec. 2530.200b-2(c)(4), the plan uses the alternative initial
eligibility computation period permitted under this paragraph. The plan
provides that an employee's initial eligibility computation period shall
be the period beginning on the first day of the first monthly payroll
period for which the employee is entitled to credit for the performance
of duties and ending on the last day of the monthly payroll period which
includes the anniversary of the last day of the initial monthly payroll
period. This condition ensures that the initial eligibility computation
period will include the 12-consecutive-month period beginning on the
employee's employment commencement date and ending on the day before the
anniversary of the employee's employment commencement date. If, however,
an employee completes the plans requirement of one year of service for
eligibility to participate (i.e., completion of 870 hours worked in an
eligibility computation period) in the initial eligibility computation
period, the plan provides that the employee is deemed to have satisfied
the plan's service requirements for eligibility to participate as of the
day before the anniversary of the first day of the initial eligibility
computation period. This provision ensures that no employee who has in
fact completed 1000 hours of service in the 12-consecutive-month period
beginning on the employee's employment commencement date will be
admitted to participation later than the date specified under section
202(a)(4) of the Act and section 410(a)(4) of the Code. For example, in
the case of an employee who begins employment in January 1977, the
employee's initial eligibility computation period begins on January 1,
1977 and ends on January 31, 1978. If the employee completes 879 hours
worked in the initial eligibility computation period, the employee is
treated as having met the plan's service requirements for eligibility to
participate as of December 31, 1977. If the plan provides for semi-
annual entry dates of January 1 and July 1, and the employee has met any
eligibility requirements of the plan other than the minimum service
requirement as of December 31, 1977, the plan must provide that the
employee commences participation as of January 1, 1978.
