Use this button to switch between dark and light mode.

What if an Employee Terminates, and Is Later Rehired? Applying ERISA’s Rule of Parity in Counting Service

September 13, 2022

Some employees stay a short while, others longer. Sometimes they leave and return. How do you count service, for eligibility and vesting, where a break in service occurs? Service counting, for vesting in employer contributions, like a 401(k) match, is important in administering a qualified plan, but employees may have to stay a minimum, like three years, to be vested. A plan can disregard an employee's service before a break in service if the employee has no vested interest in any benefit under the plan and the rule of parity applies. Under that rule, a rehired employee's prior service is disregarded if the employee's breaks in service exceed either the number of years of service the rehired employee had prior to the breaks, or five years—whichever is greater.


Related Content

  • Counting Service in Retirement Plans
    Learn more about the service-counting rules that an employer plan applies in determining when an employee can participate in a plan, when the employee vests, and, in a defined benefit plan, even how much credited service counts toward the employee’s accrued benefit.

Legal Developments  

  • Inflation Reduction Act's Impact on Group Health Plans
    The Inflation Reduction Act extends Affordable Care Act premium tax credits, allows a health savings account to pay for insulin before meeting a high-deductible health plan’s deductible, and can favorably impact retiree Medicare supplement plans by its capping seniors’ out-of-pocket drug spending.


Practical Guidance Updates
Featuring the latest updates from your Practical Guidance account.  

Experience results today with practical guidance, legal research, and data-driven insights—all in one place.

Experience Lexis+