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Prorating Hours Worked

Q. Regarding the exclusion for employees who normally work less than 20 hours per week: If the plan is drafted to exclude employees who normally work less than 10 hours per week, is such an employee no longer excluded from making elective deferrals if he completes 1,000 hours of service, or are you required to prorate the 1,000 hours requirement?

A. You are correct, the 1,000 hours would be prorated. This is a provision that many charter schools in PA use, since 500 hours is what is the eligibility for the pension. Remember that if 20 hours is now defined to mean 1,000 hours, then 10 hours must mean 500 hours for the year. This is also important if the employee is hired and we don’t think he/she will work the 10 hours per week, but after the year we look back and see that they did work 500 hours in the prior year, they would be eligible for year 2.