(b)lines Ask the Experts – Verifying Service for 15-Year Catch Up

October 11, 2011 (PLANSPONSOR (b)lines) – “I have an employee who wishes to utilize the 15-year catch-up election to contribute an amount over and above the general 402(g) limit of $16,500 (she is not yet age 50, so she cannot use the age-50 catch-up). The plan permits the election, and we have all of the data necessary to perform the calculation; when we run the calculation, she qualifies for the election.
By PS

“However, I am uncertain if she actually has completed the 15 years of service necessary to qualify for the election, since she completed five years of service, terminated employment, and was rehired a few years later. She has worked 10 years since that time, does she qualify?”   

Michael A. Webb, Vice President, Retirement Services, Cammack LaRhette Consulting, answers:  

Assuming that the service qualifies (see below), then yes, she has completed 15-year of service and is eligible for the 15-year catch-up election under 402(g)(7).  The statute requires the completion of 15 years of service, but does not state that the years must be consecutive. The final 403(b) regulations also do not state any requirement that the years be consecutive, only that the organization must have been a “qualified organization” (school, hospital, health and welfare service agency, or church organization) for the entire period of the employee’s service.   

Interestingly, the “year of service” definition is likely NOT the same definition as what would be found in your plan document for determining eligibility and vesting. Instead, it is a definition unique to determining employee contribution limits, and is defined as time worked during the employer’s annual work period that is comparable with the amount of work that is normally required of individuals performing similar services from which substantially all of their annual compensation is derived. Thus, if the employee in question completed 15 years of service utilizing this definition, then she is eligible for the additional 15-year catch-up deferral amount under 402(g)(7).  

 

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. 

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