What To Do with Rehired Employees
When an employee terminates service, active participation in the plan ceases, but what happens if you rehire a former employee? When are they eligible to participate in the Plan? The answer to this question depends on your plan document and the rehired employees’ prior eligibility in the Plan.
Sometimes the answer is immediately upon rehire! It’s important to understand and calculate your rehired employees’ correct plan entry date as failure to offer timely enrollment to employees can result in a costly correction. See below for a summary of rules to help you determine your rehired employees’ eligibility.
- Rehired employee met eligibility and entered the plan during previous employment: They are immediately eligible upon rehire.
- Rehired employee met eligibility, but terminated service prior to their plan entry date: Their new plan entry date is the later of their rehire date or their originally scheduled plan entry date.
- Rehired employee did not meet eligibility during previous employment. Their plan entry date is after satisfying all eligibility requirements.
- Rehired employee met eligibility and may have entered the Plan, BUT plan provisions changed since the employee’s termination and re-hired employee doesn’t meet the new requirements: Entry is after satisfying new eligibility requirements, unless plan grandfathers past employees.
Mishandling rehires is a very common mistake and can be difficult to manage. If you still have questions, simply ask your plan consultant at Beasley & Company. We are here to help your plan stay in compliance!