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Qualified Pension Plans

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May an employer use the following eligibility provision under a qualified plan: "employees who customarily work less than 25 hours per week are excluded for participation in the plan"? Why or why not? If this provision presents a problem, what could be done to address the problem?

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Solution Summary

The answer to this problem explains the legal perspective of IRC section 401(k) plans. The references related to the answer are also included.

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An employee who works less than 25 hours per week can be excluded from the plan. Those workers that work less than 25 hours per week are part-time workers and if plan provisions are properly drafted, part-time, temporary, seasonal, and project employees can be excluded from the plans.
In IRC section 401(k) plans eligibility requirements have been lowered from the traditional one year waiting period to less than 1,000 hours of service during 12 ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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